Mumbai, Mar 13: Caught offguard by the takeover bid from India Cements, founder-chairman of Raasi Cements BV Raju is trying to ward off the challenge by teaming up with "soft takeover-target" companies to spark off a legal assault on the Sebi-prescribed takeover code.Raasi promoters are desperately trying to muster support for their line of argument that the takeover code without a buyback clause is particularly harsh on target companies in case of hostile bids, as corporate funds are not allowed to ward off the challenge. "Unless buyback of shares is allowed, the promoters of the target company is at a disadvantage in case of a takeover bid. While the predator can use its funds to mount a takeover bid, the target company is not allowed to deploy its funds to defend the ownership," Raju said.
Says Raasi Cements managing director K V Vishnu Raju: "The takeover code is just fine for friendly takeovers, but the problem crops up only in case the bid is not so friendly. The only defence available for thepromoters of target companies is acqusition of 2 per cent shares every year through the creeping acquisition route, which is simply not adequate to safeguard controlling interest."
"Had buyback of shares been allowed under the Companies Act, the company would have been able to put up its own defence," said the company's managing director.
Although companies are not allowed to buy back its own shares under the Companies Act, the draft Companies Bill, 1997, has included a provision for buyback of shares.
Rajus have also started hectic lobbying with the FIs to drive home the point that the company's performance in recent years has far outstripped the achievements of the predators. The company claims that it has consistently offered higher returns to the shareholders vis-a-vis the raiding company India Cements.
"The compounded annualised growth rate has been among the highest in the industry and the profits generated were largely redeployed in the business to enhance shareholder-value," B V Raju said. Healso claimed that the company's overheads were among the lowest in the industry, while the capacity utlisation was as high as 113 per cent, much higher than that of India Cements.
The managing director agreed that the low equity base of Raasi was responsible for the present mayhem, but said that such a move would have had an adverse impact on the company's financial fundamentals. "Expanding the equity base would have diluted the earnings per share of the company," Vishnu Raju said.
The promoters are also citing "excellent" industrial relations with "zero downtime" during the last 20 years, despite large-scale Naxalite threats in the state. "There is only a single-party workers' union without any political affiliation, and the employee productivity has also been quite high," the Raasi managing director claimed.
"Given our overall performance, there is no reason why the predators should be allowed to take advantage of an apparent shortcoming in the takeover code," the Rajus said.
