After LMI's merger with India Foils, the enhanced stake of 8.85 per cent or 15.35 lakh shares was being held by a trustee board, which can dispose of the shares only after completion of 18 months of the merger.

With the majority stake in India Foils set to change hands, the fate of these shares is not known.

The equity pattern will change following the proposed private placement of India Foils' 1.45 crore shares and warrants. The private placement of 90 lakh equity shares of Rs 10 each at a premium of Rs 35 will result in the AV Birla group company securing 34.15 per cent of the stake. The total acquisition cost of the 1.45-crore stake is understood to be close to Rs 65 crore.

On conversion of the 55 lakh warrants -- likely to follow the private placement ofthe 90 lakh equity -- Hindalco's stake in India Foils will be around 45 per cent.

Since India Foils is opting for private placement of the shares and warrants, it has to secure the approval of its present shareholders at the extra-ordinary general meeting (EGM) on October 9, 1998, through a special resolution in line with section 81 (1)(a) of the Companies Act, 1956.

Owing to use of the private placement route, it will not have to make an open offer to minority shareholders for buying up to 20 per cent of the stake.

India Foils has a paid-up capital consisting 1.73 crore equity shares of Rs 10 each (1.12 crore shares of India Foils and 61 lakh shares to be allotted to the former shareholders of LMI).

At India Foils' EGM in December last year, it was proposed that the company's stake in LMI will be transferred to a trustee board. In line with the swap ratio of 2:5 (shareholders will be receiving two India Foils shares for every five LMI shares held by them), India Foils was entitled to get 15.35 lakhshares for the 38.37 lakh shares it held in LMI.

According to the company's notes on its accounting policy sheet, 61.40 lakh equity shares of Rs 10 each, fully paid, are to be issued by the company to the shareholders of LMI. "Pending such allotment at the year-end, the amount has been included in share capital suspense..."

It is understood from company sources that the LMI merger was aimed at facilitating the sale of a combined aluminium products manufacturer.

Since a company cannot receive and hold its own shares, India Foils' entitlement was transferred to a trustee board. The disposal of these shares will be supervised by the Industrial Credit & Investment Corporation of India.