CHI Investments’ shareholders miffed over RPG Group’s merger move
May 11, 2010
Last year, the RPG Group decided to merge four companies—Summit Securities Ltd, Brabourne Enterprises Ltd, Octav Investments Ltd and CHI Investments Ltd—with RPG Itochu Finance Ltd (RIFL), a 100% subsidiary of RPG Enterprises. However, minority shareholders of CHI Investments Ltd are not happy with the proposed merger and are raising questions over the rationale of valuations done under the proposed amalgamation.
RIFL is an unlisted firm. The new entity will be rechristened Summit Securities Ltd, which would be listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Summit Securities Ltd (earlier known as KEC Infrastructures Ltd) was incorporated in 1945. The company is involved in design, manufacture, supply and construction of power transmission lines. Shares of CHI Investments Ltd have been suspended from trading since 3rd February due to the proposed merger.
“I am holding some shares of CHI Investments. The company is proposed to be merged with RIFL and prima facie (the move) does not appear to be fair with minority investors. I think there will be significant erosion in the value of investments in CHI Investments if the merger ratio is not changed,” said an investor, preferring anonymity.
The valuations were carried out by auditing firm Grant Thornton.The Board of directors gave their approval for a share-exchange ratio of one equity share of RIFL of Rs10 each for six equity shares of CHI of Rs10 on 10 July 2009.
In the case of Summit, one share of RIFL will be issued for every 16 shares held in Summit, while one share of RIFL will be issued for every 28 shares held in Brabourne. Reportedly, a number of minority investors believe that the valuations are unfair.
Maintaining that the company is not considering revising swap value ratio, RPG group in an email said, “The scheme has already been implemented. The question of revising swap ratio does not arise for the simple reason they are determined by independent reputed valuers and approved by the Stock Exchanges and the High Court before being implemented.”
The company feels that the merger would benefit the companies by reducing overall administration costs and bring in more efficiency. Incorporated in 1997, RIFL is engaged in hire-purchase, car leasing, commercial vehicles, construction equipment and textile machinery.
Post merger, RIFL’s authorised share capital will increase to Rs180 crore from Rs30 crore.An email query sent to CHI Investments remained unanswered till the time of writing.— Moneylife Digital Team