SP Tulsian view on Kanoria Chemicals

The Kanoria Chemicals management has no respect and is not concerned about the interest of the minority shareholders and they just talk that they got good price, says SP Tulsian of sptulsian.com.

Tulsian told CNBC-TV18, "It is an unfortunate deal for minority shareholders because I just heard Mr Kanoria explaining the contours of the deal. If you go by the broad parameter, Rs 830 crore is a total consideration on a slump sale basis. Obviously, the slump sale will attract tax which on a ballpark figure will be about Rs 200 crore taxes. They have earmarked about Rs 250 crore for debt retirement and if you knockoff this Rs 450 crore, the residual amount left with the company is close to about Rs 380 crore."
He further added, "If you see the shareholding pattern, Mr Kanoria has been saying that if they distribute the dividend, the majority chunk will go to them but I fail to understand that even if you take this situation now, the entire amount is at the command of Mr Kanoria to the extent of about Rs 380 crore to Rs 400 crore and minority shareholders are not getting anything."
"Coming on the shareholding pattern, promoters are holding 57%, while the six institutional investors of which IFCI and the other general insurance and LIC are the major shareholders holding 25% stake. They should raise their voice because 18% of the minority shareholders could have very well been compensated in lieu of the amount of tax which the company will be paying on these transactions which is to the extent of about Rs 180-200 crore."
"It all depends on the return down value of all the assets of this particular division. These things are very unfortunate. This is again a repeat of similar transactions like in the past we have discussed Gwalior Chemicals, Borosil Glass and Piramal Health. If they would have had any intention of giving dividend, in that event they would have gone for a stake sale only where an open offer would have triggered because the dividend distribution tax attracts 18% tax."
"On the face of it, you can make out that the management has no respect and are not concerned about the interest of the minority shareholders and they just talk that they got good price, they have good opportunity in their Formaldehyde plant, in their Ankleshwar plant and in their Vizag plant. I feel pity for the minority shareholders."