MUMBAI, April 13: Tainwala Polycontainers has obtained shareholder approval to merge it with group flagship, Tainwala Chemicals & Plastics. At extraordinary general meetings (EGMs) held on Monday in pursuance to a Bombay high court order last month, shareholders of both companies ratified a scheme of amalgamation under which holders of seven shares of Tainwala Polycontainers will receive one equity share in the merged company.Chairman Ramesh Tainwala told shareholders that the decision to merge Tainwala Polycontainers into the flagship company was prompted by the poor performance and adverse market conditions. "The company never came out of the red since inception because of massive overcapacity and a general recession," Tainwala said.
Justifying the merger decision, Tainwala said: "The merger will result in greater operational efficiency and eliminate duplication in the administration and sales structure.
Tainwala Polycontainers has a paid-up equity of Rs 7.80 crore, while Tainwala Chemicals has anequity base of Rs 9.36 crore. As per the amalgamation scheme, the merged firm's share capital will be Rs 10.49 crore with the extinguishment of 30 lakh-odd shares.
Minority shareholders, however, said that the swap ratio of 7:1 would inevitably result in odd-lots and opined that the exchange ratio was unfair to the Tainwala Polycontainers shareholders. "A swap ratio of 5:1 would have been ideal and fair to the shareholders," a minority shareholder said.The swap ratio was finalised by auditors RS Lodha & Co, who arrived at the exchange ratio using the net asset value value (NAV) method.
According to another shareholder Dinesh V Lakhani, the very idea of floating a separate company for polycontainers in 1994 was unjustified as the synergies of operation between the two existed since inception.
He alleged that huge amount of interest-free loans were provided to group firms and directors, which was not in the interest of the company. He pointed out to the findings of the statutory auditors RS Lodha & Cowhere the auditors expressed their inability to comment on the recoverability of the loans. "We are unable to express our opinion as to the extent of realisability or recoverability (presently not determinable) in respect of the following: (i) Investments of Rs 4.61 lakh and interest-free loans of Rs 1.69 crore to directors, interested companies, as the networth of the said companies have become negative. (ii) Interest-free loans of Rs 1.91 crore to another company," the auditors had said in the company's annual accounts for 1996-97. Commenting on the auditors' qualifications, Tainwala said: "Some funds for some period were invested keeping in mind the interest of the company."
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
