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Battle rages between India Cements, BV Raju for SVCL

M S Shanker in Hyderabad

The tussle between India Cements and former chairman of Raasi Cements B V Raju for the control of Sri Vishnu Cements in Andhra Pradesh is becoming curiouser.

A civil court in Hyderabad has restrained the nine companies associated with Raju from selling their current 43.88 per cent stake in the Rs 237 million paid-up capital of Sri Vishnu Cements until further orders. The matter has been posted to August 26.

Counsels representing the nine companies are said to have appeared before the court under protest. Contending that the court has no jurisdiction on the stand, they nevertheless pointed out that the companies are anyway bound by the non-disposable commitment to the financial institutions.

Controlling stake in SVCL was with RCL which was taken over by ICL in April 1998. As chairman of RCL before the ICL takeover, Raju was instrumental in transferring about 9.4 million SVCL shares (39.49 per cent stake) held by RCL in favour of nine of his group companies, each share at Rs 10 as against the then ruling market price of Rs 7.

However, soon after the takeover, RCL' s management, under the ICL regime, found the transactions shady. A suit was filed in the Andhra Pradesh high court contending contravention of the Companies Act. Another complaint was made to the Securities and Exchange Board of India, alleging violation of its (substantial acquisition of shares and takeover) regulations by Raju.

RCL (read ICL) has been arguing that the Companies Act stipulates that Raju should have disclosed his interest in the transferee companies at the time of transaction, besides seeking shareholders' and Centre's approval because it involved controlling interest.

Ever since, Raju and ICL have been waging a corporate war to seek control of SVCL. This took the form of open bids by Raju and ICL, leading to a spurt in the scrip's price on both the Bombay Stock Exchange and the National Stock Exchange. Today, SVCL quoted at Rs 32.60 at the BSE. Last fortnight, it was at Rs 13.40.

It is learnt that Raju, along with Udayan Bose of Lazard CreditCapital, manager to the open offer, met SEBI chairman D R Mehta last week. A hearing was apparently fixed for August 20.

Raju also responded to the SEBI show-cause notice. He clarified that SVCL's shares were transferred to nine other group companies last September, much before ICL made an open bid on March 2, 1998.

The ICL in its petition to the SEBI also alleged that Raju did not take the permission of financial institutions for transfer of stakes.

Market sources indicated it is now too late reverse the transactions. Even if found guilty, Raju may be slapped with some fine. That's it.

Sources observed that Raju's move to transfer RCL's stake in SVCL to nine group companies was aimed at making RCL itself less attractive to takeover hawks. However, that could not stop ICL from taking over RCL in April, as the Rajus capitulated under sustained ICL offensive, offloading their entire promoters' stake of 32 per cent. After taking over RCL, ICL naturally turned its gaze at SVCL.

Now, ICL has raised its holding in Raasi by 53 per cent to nearly 85 per cent, from its earlier 21 per cent, after bagging 20 per cent from its open offer and 12 per cent form other RCL shareholders.

All along in the past, RCL under Raju maintained that SVCL is not a hot cake, so to say, having been in the BIFR net, and turning in comparitively poor performance in the highly competitive cement industry.

All the same, ICL has trained its sight on SVCL of which Raju remains the chairman. For SVCL's capacity has been raised from 0.8 million tonnes and a turnaround seems round the corner.