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    Investors concerned over equity recast at Indian Card Clothing

    Synopsis

    The company, which makes card clothing and card room accessories for textile carding machines and has a market value of ₹162 crore, announced its issued paid-up capital will be cut from from 5.94 million shares of ₹10 each to 29,705 shares of ₹2,000 each to save 'overhead and administrative costs'. Fractional shares that cannot be combined to form whole shares will be cancelled, and shareholders will receive compensation equivalent to the fair value, it said.

    equity
    Legal experts said Sebi must look into such instances that impact smaller individual investors.
    Mumbai: Pune-based Indian Card Clothing's plan to restructure its equity capital base has raised concerns among a section of its retail shareholders and corporate governance experts.

    The company, which makes card clothing and card room accessories for textile carding machines and has a market value of ₹162 crore, announced its issued paid-up capital will be cut from from 5.94 million shares of ₹10 each to 29,705 shares of ₹2,000 each to save 'overhead and administrative costs'. Fractional shares that cannot be combined to form whole shares will be cancelled, and shareholders will receive compensation equivalent to the fair value, it said.

    This implies that an investor holding 199 shares with a face value of ₹10 will receive a monetary settlement based on 'fair value', while an investor possessing 201 shares will be allocated 1 share with a face value of ₹2,000 and will receive compensation for the remaining 1 share with a face value of ₹10. Indian Card Clothing had 9,332 retail shareholders, whose holdings stood at less than ₹2lakh as on June 30.

    Corporate governance experts said the move favours promoters though it is not against rules.

    "While it is within the law, this is one more example of 'promoters' using their shareholding to force a decision that is primarily in their interest," said Amit Tandon, MD of Institutional Investor Advisory Services India (IiAS).

    This could also be an indirect way of delisting the company from the bourses.

    "Promoters currently own 67.33% of the shares, and through consolidation, there is a potential for promoters to exert control over 90% of the shares, which is the threshold limit for delisting," said Arun Goenka, president of Small Investors' Welfare Association. "If this objective is achieved, it may undermine the process of fair price discovery."

    An email query sent to the company did not elicit any response until Sunday press time. The e-voting by shareholders to approve the proposal commenced on August 29 and ends on September 27.

    Legal experts said Sebi must look into such instances that impact smaller individual investors.

    "While technically legal, this could attract regulatory scrutiny, especially from bodies like Sebi, which are mandated to ensure market integrity and protect minority shareholders," said Sonam Chandwani, managing partner, KS Legal & Associates. "Such tactics, if unchecked, may undermine investor confidence and prompt calls for regulatory reforms to safeguard the principles of an inclusive and transparent marketplace."

    The stock, which rallied 28% in the last week, is currently trading at ₹272 against the book value of ₹401 apiece. The company sold land in Pune in FY22 for ₹220 crore and paid a special dividend of 250% or ₹25 per share, distributing around ₹15 crore. As of March 31, the company's investment is ₹150 crore and has a cash equivalent of ₹44 crore.




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    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

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