For shareholders of English Indian Clays, a Thapar group company, a horror story unfolded on February 13 when the share plunged 90%.
Share plunges 90%, irate shareholders want to know what’s happening l BSE blames merchant banker l Co officials give ‘hold’ call
MUMBAI: For shareholders of English Indian Clays, a Thapar group company, a horror story unfolded on February 13 when the share plunged 90%.
They were quoting at a handsome four figures till a godawful screw-up of the demerger process took the wind out of the stock.
Shareholders had expected a bonanza by way of compensation for the demerger of an investment division of EIC into Bharat Starch Products Ltd, also a Thapar Group company. Instead, they saw a dramatic erosion in value.
On Tuesday, the EIC shares had ended at Rs 1,690. The very next day, when the Bombay Stock Exchange (BSE) opened for trading, the stock opened at a specially demarcated price of Rs 179.
Though it closed at the 5% upper circuit of Rs 187.95, shareholders were left wondering as to what happened during the night of February 12 to warrant the value hacking.
Turns out, it had nothing to do with market sentiment, but may well be a case of sheer negligence.
The blame-game started immediately with the company asking BSE to suspend trading and correct the share price. BSE has so far refused.
An EIC source said senior company officials —- namely P S Saini, company secretary, and S K Jain, vice-president, finance —- were camping in Mumbai to take remedial measures.
According to him, they knocked on the doors of the BSE authorities and the Securities and Exchange Board of India to find a solution because the base price was been wrongly arrived by BSE officials.
Responding to a DNA Money questionnaire by email, BSE officials were emphatic that the fault lies with the investment banker who structured the demerger.
“We deny the wrong and baseless allegations to the effect that BSE has erred in the process relating to trading in the equity shares of English India Clays Ltd, post its demerger,” the spokesperson said.
PNR Securities, a banker based in Green Park Market, New Delhi, structured the demerger, which was in accordance with a scheme under Sections 391-394 of the Companies Act, 1956. The process was sanctioned by the high courts at Kerala and New Delhi.
Under the scheme, upon demerger of the investments division, investors shall be issued and alloted four fully paid up BSP shares for every nineteen shares of EIC held.
The shareholders also have an option to receive 8% cumulative redeemable preference shares of BSP in lieu of equity shares or sell the BSP shares to the promoter at Rs 1,000 per share within one year.
BSE explained in the mail: “As is the practice in all cases of demerger, the company was required to furnish a valuation certificate from a Sebi-approved merchant banker indicating the fair value of the equity shares of the company.” Turn to Page 28
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