Did Shree Cement promoters shortchange minority shareholders?

MUMBAI: Proxy advisory firm InGovern Research Services said NBI Industrial Finance, a listed entity controlled by BG Bangur and family, sold shares of some unlisted companies worth more than Rs 3,000 crore to another privately-owned promoter group firm for Rs 89 crores in FY17. BG Bangur and family own , the second largest cement producer in terms of market value.

The company neither took shareholders permission for the transactions, which came to light recently, nor published the valuation report, said InGovern in a letter to market regulator Sebi.

An email query sent to NBI, Shree Cement and Sebi did not elicit any response.

NBI shifted from Delhi Stock Exchange to the NSE on November 21, 2016. NBI held shares of several listed and unlisted companies. In March 2017, NBI sold off shares of many unlisted companies in its portfolio to privately owned promoter group companies, said InGovern.All shares of unlisted companies NBI owned were promoter group companies, which in turn held shares in the listed Shree Cement Limited and other listed companies.

For instance, NBI sold shares of the unlisted Shree Capital Services Ltd, which is the largest shareholder of Shree Cement Limited. It held 89.84 lakh shares or 25.79% shareholding in Shree Cement as on March 31, 2021.

InGovern said the value of this 25.79% stake on Shree Cement shares was Rs 12,560 crore in March 2017. As NBI held 15.38% shares of Shree Capital Services, the beneficial interest of NBI would have been Rs.1,932 crores, said the proxy advisory firm. Similarly, NBI sold shares of The Venktesh Co, Digvijay Finlease, Mannakrishna Investments, Newa Investments, Ragini Finance, Rajesh Vanijya among others.

The value of Shree Cement shares held by all these unlisted companies was Rs. 28,125 crores and the proportionate beneficial value to NBI would have been Rs. 3,077 crores, according to InGovern. The shares were sold at an overall consideration of only Rs. 89 crores, a 97% discount to fair value, the firm said. Apart from Shree Cement, these investment companies also held shares of other listed and unlisted companies, which meant that the beneficial value to NBI would have been much higher, said InGovern.

The proxy firm alleged that Ashok Bhandari, an independent director, who was on the board of NBI that took the decision to sell the unlisted shares at a huge discount, has been appointed as chairman of the company in September 2020.

“Such brazen fraud perpetrated by the promoters of a large, listed company on minority shareholders needs to be dealt with by the regulator,” said InGovern’s letter. “SEBI needs to call for an independent audit and independent valuation of the sale of shares and determination of the correct price at which the sale ought to have been executed.”