At a board meeting on Friday, the scheme of arrangement for transfer of the steel plant to the new company was approved. The scheme envisages issue and allotment of seven shares of Rs 10 each in MSL for every eight shares held in HDC.

Company officials, however, were unable to provide the basis of valuation of the steel plant. According to them, the scheme has been drawn up by the company's solicitors and is based on the assets and liabilities of the steel unit as on March 31, 1998.

The terms of the agreement provide that MSL shall pay to HDC "an amount equivalent to the difference between the assets and liabilities relating to the Malanpur Iron & Steel Company (MISC) unit as reduced by theaggregate of the face value of the shares to be issued by MSL."

The net dues to HDC "shall not become payable immediately and shall be treated as an interest-free loan from the company to MSL to be repaid by MSL to the company in such a manner as may be mutually agreed between the company and MSL."

HDC, promoted by Rajendra Mody, had reported net sales of Rs 540.31 crore and net profit of Rs 5.60 crore in the year ended March 31, 1998. In the first quarter ended on June 30, 1998, net sales and net profit were Rs 125.37 crore and Rs 1.60 crore respectively.

The company's Bharatpur plant, which comes under the general engineering works, continues to be under lockout since December 24, 1997.

In anticipation of the decision to hive off the steel unit, which has absorbed an investment exceeding Rs 600 crore, buying interest suddenly emerged in the scrip on the Calcutta Stock Exchange. In the last three days, high volumes were recorded in this relatively dormant scrip. On Wednesday, 23,800 shares changedhands and the scrip closed at Rs 9.65. The next day, 328,400 shares were traded with the scrip closing at Rs 11.30.

At close of trading on Friday, the scrip reacted on details of the scheme of arrangement from an intra-day peak of Rs 12. It closed at Rs 10.25 and 102,900 shares were traded. Investor sentiment was dampened by the news that HDC would not gain anything immediately by the transfer of the steel unit to a new company, market sources opined.