InGovern says the merger will hurt interest of minority shareholders.
Barely a few months after it raised concerns over the fate of minority shareholders in an overly complex and convoluted restructuring drive at tractor major Escorts Ltd, corporate governance firm InGovern has found parallels with a similar scheme of arrangement and this time in the case of HT Media the publisher of English dailies Hindustan Times and Mint.
The proposed arrangement seeks to merge one of its indirectly held web-based job portals with the listed HT Media, a move that InGovern says would hurt minority shareholders, reports Ronojoy Banerjee of CNBC-TV18.
Ahead of the shareholder voting on July 10 on HT Media's proposal to merge job portal - an entity of its subsidiary Firefly e-Ventures Ltd (FEVL) with itself - InGovern has raised concerns over the valuation of the entity, arguing that minority shareholders could get short changed in the deal. The scheme of arrangement seeks to de-merge Job Portals or shine.com and merge it with the listed entity of HT Media. However, InGovern alleges that the valuation of loss making job portal at Rs 146 crore seems extremely high.
Post-merger there would be a dilution of minority shareholding to 29.7% from 31.1% and that job portal may continue making losses in the near term eroding HT Media's net worth
Shriram Subramanian, MD, InGovern, says that today minority shareholders own about 31% stake and tomorrow their shareholding gets reduced by one and a half percent just because of some restructuring is not justifiable reason.
The 100% asset continues to be owned by the company, the trust in which shares are issued is ultimately controlled by the promoters. The promoters can eventually justify that the trust is owned by all shareholders but in reality it is not.
HT Media has countered all the concerns raised by InGovern. The media house said the transfer of job portal is within the group and hence not a cause of concern to the minority shareholders.
The dilution of shareholding of both promoter and minority shareholders is in the same proportion; in fact the promoter's holding also stands diluted from 68.84% to 65.63%. Shares issued to the trust shall not carry any voting right and the valuation of the job portal has been determined pursuant to an independent valuation and lastly, the impact of transfer on financials of HTML or inconsequential since HTML's publishes consolidated financial results.
While InGovern has also stated that the restructuring has unnecessarily complicated the crux of the issues pertaining to the interest of the minority shareholders of the company and the valuation of job portal has been clarified by HT Media. But, InGovern is holding its stand and has in fact recommended voting against the proposed merger next week.
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