Search the Internet          Tips  Sites: Finance, Investment

Modi Rubber: LIC wants to cancel stake sale

BS Bureaus

Life Insurance Corporation of India is exploring legal options to cancel the sale of its 12 per cent stake in Modi Rubber in the open offer made by the Modis. The LIC brass met senior officials of the Industrial Development Bank of India over the weekend, apparently to find ways to make the entire transaction void.

LIC had sold off its 12 per cent stake in Modi Rubber on July 16, the last day of the open offer till it was extended by another week by the Bombay High Court. Initially, the move was perceived to be LIC breaking away from the FIs' consortium but later it was found that the sale was not cleared by LIC's investment committee. "It was a mistake committed by a junior official," said a source.

LIC has already informed HSBC Securities, lead managers to the open offer, about its intention to go back on the stake sale. But HSBC Securities sources said the shares had been dematerialised and got transferred automatically on July 16 itself. There was no question of going back on the sale now, the sources said.

While the Modi brothers, Vinay Kumar Modi and Bhupendra Kumar Modi, were not available for comment, sources said that subscription to an open offer cannot be reversed. "This is not possible. In fact, there is a judgement, which says that if a shareholder has sold his shares in an open offer, he cannot withdraw the same later," the sources added.

Senior management officials at LIC admitted that there had been "a miscommunication of sorts" and that the financial institutions were now trying to revert the sale by making the transaction void. It is understood that the officer responsible for the transaction has been suspended. This, however, could not be verified with the LIC chairman, GN Bajpai.

"All along we have been taking a united stand. The stake sale is a mistake and it does not have legal sanctity as it was not cleared by the LIC investment committee. Efforts are on to cancel it. There is no division among the institutions," said an institutional source.

LIC participated in the MRL open offer on July 16, a fact unknown to other financial institutions. Bajpai reportedly claimed ignorance over the entire incident even as it was learnt that the promoters of MRL had already mopped up over 35 per cent of the company's stake through the open offer.

FIs to meet Modi brothers Monday

Financial institutions will meet the Modi Rubber promoters on Monday to discuss the terms of the open offer. "A final decision will be taken on Monday after discussing the issue with them," a top institutional source said. "Though we are in favour of offering our stake with some riders, we may put forward some more conditions," the source added. The offer closes on Monday.

Powered by

YOU MAY ALSO WANT TO READ:
The Rediff-Business Standard Special
The Budget 2001-2002 Special
Money
Business News

Tell us what you think of this report