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Wednesday, September 13, 2006

DLF has to settle investor dispute ahead of float

The company affairs ministry would clear a mega initial public offer, IPO of DLF Universal only after the real estate developer settles on its own all outstanding issues with its residual investors, who could not exit from the company during its ’03 de-listing, reports The Economic Times.

Over Rs 1,500 crore (Rs 15 billion) is at stake in this dispute as per DLF’s earlier offer, which had been withdrawn early this month. Investors claim that the debenture warrants of Rs 100 awarded to the luckier ones last year, now stand to be worth Rs 35,000 after conversion to equity shares, if they were to go by the previous offer price.

The ministry is not expected to show the green light to the IPO merely based on a report of the Registrar of Companies, which has not found the company guilty of keeping 1,308 investors uninformed about a debenture issue last year.

The ministry, which is examining the RoC report now, is likely to take the view that a mutual settlement between the company and the investors would be the ideal solution rather than the government sitting in judgement of not only legal, but also the moral behaviour of the company prior to the IPO. It was alleged that DLF had misled investors last year-end, saying it had no immediate plans to re-list the shares - a charge difficult to examine as the company law does not define the term ‘immediate’.

Although the company could show evidence that it had despatched offer letters to the minority shareholders, it can hardly be established that investors had received it but had misjudged its worth as the company claims. Instead of the government making subjective conclusions, it is better to give the two parties an opportunity to settle the issue between themselves, a source said.

Besides, if the disagreement is only about the delivery of letters and not about intentions, then an amicable solution is easy. This would ensure an opportunity to protect the investors’ interests without the government interfering in the affairs of a company when there is no conclusive evidence of wrongdoing.

The episode of residual investors staking claim for a huge amount on the eve of the company going public again, has also drawn the government’s attention to address it in the new company law. The new law would require all corporates to set up investor grievance committees, it is understood.

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