Minority shareholders want Mallya to be removed from MCF board

The takeover of Mangalore Chemicals and Fertilizers has taken another turn, with Nagreeka Foils, a minority shareholder in the company, writing to the Securities and Exchange Board of India  to protect the interests of minority shareholders.

Nagreeka’s letter, a copy of which is available with Business Standard, comes a day after the Competition Commission of India approved Zuari chief Saroj Poddar’s joint open offer with UB Group chief Vijay Mallya to acquire an additional 26 per cent stake in MCF.

Nagreeka Foils, listed on BSE and the National Stock Exchange, holds about 350,000 shares in MCF.

In its letter to Sebi, Nagreeka has sought Mallya be removed from the MCF board, saying the fact that he continued to be the promoter despite being tagged a wilful defaulter could impact their prospects, as well as those of MCF.

This might also result in non-availability of loans to the company, the letter added.

It urged Mallya and S R Gupte be removed as directors from the MCF board and all contractual relationships with the Adventz Group, through which Mallya was acting as a person in concert and exercising control, be unwinded. Poddar refused to comment on the matter.

Earlier, Kolkata-based United Bank of India had written to Sebi, seeking reconsideration of the approval to a joint open offer by Poddar and Mallya.

According to an agreement signed between UB Group and Poddar’s Adventz Group on May 12, if they acquire controlling stake in the company, Mallya will be MCF chairman for the next five years.

He can also appoint three directors on the board and have the right of first refusal over Poddar’s shares in MCF.

In its letter, Nagreeka opposed this agreement.

Sources said unless Mallya secured a stay on United Bank of India’s decision to label him a wilful defaulter, his agreement with Poddar would have to be re-worked.

According to Reserve Bank of India norms, a wilful default is when an entity doesn’t repay its dues despite having the capacity to do so or when it doesn’t use the borrowed money for the purpose for which the loan is taken.

Through the UB Group, Mallya holds 21.98 per cent stake in MCF, while Poddar, through Zuari, holds 16.43 per cent stake.

The two have joined hands and are competing with Deepak Fertilisers for controlling stake in MCF.

At the end of the June quarter, Deepak Fertilisers owned 25.3 per cent stake in MCF.

It has made an open offer, at Rs 63 a share, for an additional 26 per cent stake.

To counter this, Poddar and Mallya had jointly made an open offer at Rs 68.55 a share.

Last month, Sebi had approved both these proposals.

Image: Vijay Mallya; Photograph: Vivek Prakash/Reuters