"We have to study the legal implications of the move," said Sebi chairman DR Mehta. A decision is expected to be taken on Thursday by the securities watchdog. It is learnt that the Saurashtra Cement management has justified the allotments made even as two tranches of the preferential offer were made after the Autoriders bid on March 19. It has presented to the Sebi a detailed legal opinion from PN Bhagwati, the author of the takeover code.Interestingly, while two lots of 1.20 crore shares issued to the promoters is subject to a three-year lock-in stipulation and cannot be traded, another chunk of 38.10 lakh shares has been issued toDanish cement giant FL Smidth and Industrialisation Fund which are open for trading at the Saurashtra Kutch Stock Exchange.

The Patels-controlled Autoriders group has taken up the matter with the Exchange and sought delisting of the shares at the earliest.

The Autoriders group, which had made an open offer for a 20 per cent stake in Saurashtra Cement, has said that the listing of the fresh shares at the local bourse violated all norms, as the securities watchdog is yet to take a decision on the legality of the preferential allotment. Saurashtra Cement has admittedly issued shares on a preferential basis to its promoters after an open offer for a 20 per cent stake was made by the Autoriders group.

The Bombay Stock Exchange had earlier refused listing of the additional Saurashtra Cement shares saying the matter needed the clearance of Sebi. The company instead went ahead and secured a listing of the shares at the regional stock exchange.

A letter issued by the Saurashtra Kutch Stock Exchange to thecompany says: "We wish to inform you that 1,58,10,600 equity shares of Rs 10 each are admitted to dealing on our stock exchange with effect from today, subject to the shares under lock-in period as under the prevailing Sebi guidelines."

Saurashtra Cement had earlier informed Sebi that two tranches of its controversial preferential allotment came after Autoriders' bid. While 80 lakh shares were offered to the promoters on March 11, a week ahead of the open offer, subsequently, on March 27, the company alloted 40 lakh shares to the promoters, and finally a chunk of 38 lakh shares was allotted the FL Smidth and Industrialisation Fund on March 31. These last two came after the Autoriders group announced its open offer on March 19.

The company's management said that its equity had in fact gone up to Rs 27.8 crore from Rs 12 crore. Autoriders sources say that they are confident that the allotments made subsequent to the open offer on March 19 will be declared null and void, as it blatantly violated theprovisions of the takeover code.

The Mehtas-controlled Saurashtra Cement has informed Sebi that the company has issued 120 lakh equity shares to the promoters on a preferential basis at Rs 3 per share, as against an issue price of Rs 30 (with a premium of Rs 20).The preferential allotment, subject to clearance from Sebi, will hike the stake of the promoters to a comfortable 64 per cent, while the holding of the financial institutions will come down sharply from 15 per cent to 3 per cent.