• PAGE ONE
• INDEX
• HOME

Modis' control of MRL hinges on HC ruling on LIC suit

Our Bureau

NEW DELHI, July 25

THE attempts by the Modi brothers-- Dr B.K. Modi and Mr V.K. Modi -- to gain management control of Modi Rubber Ltd (MRL) hinges to a large extent on the view that the Mumbai High Court takes on Life Insurance Corporation's (LIC's) tender of its 10.8 per cent holding in MRL in the open offer that closed on Monday. The court is expected to hear the matter during the course of this week.

Analysts say that if the court was to reject the suit filed by LIC seeking repudiation of its tender of shares on the plea that its officers acted ``unauthorisedly and illegally'', the Modi brothers' consortium by virtue of the success of the offer would gain an additional 35 per cent to its existing stake of 12.53 per cent (at the time of open offer) in MRL.

``An equity holding of about 47 per cent would make the Modi brothers the largest shareholder in the company which is still good enough to help them restructure MRL in the way that they want it to be done,'' they said.

In fact, Dr B.K. Modi, one of the Managing Directors of MRL, has already announced the intention of the Modis to eventually (after gaining management control) hive off the tyre business of MRL into a 100 per cent subsidiary and then induct a strategic pa rtner -- which may well be the Continental of Germany -- into the subsidiary for charting the future business growth.

Persons deemed to be acting in concert for the open offer control about 10.87 per cent in MRL. Out of this, Modi Spg, Modi Industries and Modipon together hold a stake of 10.38 per cent.

The ruling of the Securities Appellate Tribunal (SAT), which is expected to come by July 31, in the Modipon's appeal against SEBI order will also be crucial as Modipon controls about 4.53 per cent in MRL.

Corporate observers feel that if Modipon were to be allowed to participate in the open offer, it would only help the Modis mobilise additional shares. Modipon's share would come handy in case the brothers fall short of their attempts to acquire 35 per ce nt.

``Suppose one considers the worst case scenario of LIC's tender not being accepted, then the stakes of Modipon and Modi Spinning (together 7.19 per cent) would become crucial even though they may only partially make up for the shortfall. It appears that the LIC's tender of shares has helped the offer sail through,'' they said.

Meanwhile, sources said that HSBC Securities, the managers to the open offer, is awaiting the outcome of the court's view on the LIC matter before they finalise the tally and comply with other procedural requirements.