CHENNAI, June 20: Some shareholders of Pond's India Ltd have expressed reservations about the company's proposed merger with Hindustan Lever Ltd. Since the preferential share allotment had been settled amicably, the shareholders, at the annual general meeting held on Friday, were of the opinion that the pending bonus issue would also be settled. ``Will it be a case of the big brother gobbling up Pond's?'' a shareholder asked.

In 1993, Pond's announced a 1:1 bonus issue which was linked to a preferential issue to Unilever. The preferential issue was priced at Rs 180 as against the then prevailing market price of Rs 800 per share.Subsequently, the preferential allotment ran into rough weather with the RBI bringing in pricing guidelines for preferential allotments. Last week, the company worked out a compromise with the central bank regarding the preferential issue, which will resolve the four-year old bonus issue problem.

The issue was not on the agenda for discussion at the AGM as the compromise was worked out only last week whereas the notice to the shareholders had been sent nearly a month ago. However, shareholders felt that a merger would not be beneficial to them. The objection was on the grounds that Pond's had a better growth record than HLL and that the dividend paid out by the company was higher than HLL's dividend. The company's chairman said HLL would review the issue and try to provide a solution which would enhance shareholders' value. According to analysts, a merger has been on the cards ever since Unilever decided to consolidate its operations in India under HLL.

The shareholders also wanted to know when the bonus issue would come through. The chairman said a new application for the preferential allottment has been submitted to the RBI. Once the cases pending in the Mumbai High Court and Karnataka court were settled, the bonus issue would be announced. The case, against the allotment, pending in the Karnataka High Court was filed by a shareholder. Some other shareholders appealed to the petitioner to withdraw the case against the company.

Another issue raised at the AGM pertained to Quest International, a division of Pond's in India. HLL's parent company Unilever, UK, had hived of the speciality chemicals divison to ICI, UK, and Quest International was a part of this division. However, the chairman said Unilever had given HLL the authority to decide what was best for its Indian operations. Since Quest International (India) sources its technology from its parent company in the United Kingdom, a dilemma is raised.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.