Mumbai, Feb 13: ICI Plc is examining the option of picking up Atul Choksey's 9.1 per cent stake in Asian Paints through ICI India, its 51 per cent-owned Indian subsidiary.To accomplish this, ICI India will have to get permission of Department of Company Affairs (DCA) for investment above a stipulated maximum limit of 30 per cent of its equity and free reserves.
The Foreign Investment Promotion Board (FIPB) has thrown a spanner in the UK-based MNC's works by rejecting the British company's application to bring in funds for the purpose of purchasing the shares. So, instead of going to the Foreign Investment Promotion Board, the paints major is now hoping to push a favourable decision through the Department of Company Affairs.
The other option ICI has is to wait for the new parliament to form itself quickly following the elections so that the Companies Act Amendment Bill 1997 is cleared swiftly. The Amendment proposes to raise the ceiling for the maximum permissible investment to 60 per cent of theaggregate equity and free reserves of the company.
A third option for ICI India would be to raise its equity, an unlikely situation given the poor condition of the market and the controversy-marred Asian Paints issue itself.
Asian Paints sources, when contacted were not officially available for comment. However, an inside source close to the management which has drummed up considerable opinion against the ICI effort, said that as far as the top brass was concerned the issue was irrelevant because the concerned shares had not come for transfer to the company yet.
ICI India sources indicated that in "no circumstances" will it let go of the 9.1 per cent stake in Asian Paints. "It is a strategic decision on our part, but we have no intention to make any takeover attempt of Asian Paints," they added.
ICI India, approached by the late Asian Paints chairman Champaklal Choksey to buy out his 9.1 per cent stake in the company in April last year, had turned to its UK-based parent as it "lacked funds" forfinancing the purchase of the Chokseys stake.
ICI India is also hamstrung by a provision in the Companies Act, 1956, by which it is not allowed to directly invest (without permission of the Union government) in excess of 30 per cent of its equity and free reserves of the company. The amount required to pick up the disputed 9.1 per cent stake will exceed the 30 per cent upper limit.
The FIPB has yet to take any decision on the issue. As elections are round the corner, sources indicated that the FIPB is likely to sit on the application till a new government is formed. ICI had been asked by the FIPB to get a board resolution from Asian Paints for the transfer of the shares. The Asian Paints board on its part had promptly refused. The shares are still lying with Kotak Mahindra Capital Company.
ICI sources said that the Securities Contract Regulation Act, under section 22(a), the shares of a company cannot be transferred if (a) the transfer deed was defective, (b) the transfer was violative of the laws ofthe land, and (c) if the board of directors of the company felt that the transfer could result in a change in the composition of the board which was against the interest of the company and shareholders.
However, this particular section was omitted by the Depositories Ordinance, 1996, with retrospective effect from 20.9.95. According to the Companies Act, under section 111, shares of companies are freely transferable and if opposed the transferee can approach the Company Law Board (CLB).
ICI sources also point out that the Supreme Court, in the Hindustan Lever-Tomco merger case had commented that India was moving towards a legislative direction allowing freer transferability of and trading of shares. "If the Asian Paints board refuses again to transfer the shares, ICI will move the Company Law Board," ICI sources indicated.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
