Rigging hindered favourable swap ratio: FAL Industries'' shareholders

Venkatachari Jagannathan
16 March 2006

Chennai: The trades in FAL Industries Limited's scrip between March-May 2005 are manipulated to arrive at a harmful swap ratio, the minority shareholders have contented before the Madras High Court.

These shareholders are opposing the scheme of amalgamation of FAL Industries with the Forbes Gokak Limited. (See: Minority shareholders oppose FAL Industries amalgamation with Forbes Gokak).

Arguing their case on March 15, 2006, advocate K Kannan, counsel for the minority share holders, questioned the methodology adopted by N M Raiji & Co in valuing the two companies and arriving at the swap ratio.

Kannan argued that the FAL Industries scrip was infrequently traded. The trade volumes on the Bombay Stock Exchange (BSE) between June and November 2004 totalled 70,200 shares. The month-wise break-up of the trades was 2,370 shares in June, 2,910 shares in July, 8,500 shares in August, spurting to 29,668 shares in September, 7,437 shares in October and 19,315 shares in November. This, he pointed out, amounted to just 1.539 per cent of the total shares.

For the next three months, the total volume was 46,180 shares or 1.012 per cent — in December 2004, it was 29,596 shares, in January 2005 6,631 and 9,953 shares in February.

However, between March and May 2005 the volumes went up to 274,540 shares (6.0222 per cent) — in March 198,312 shares, in April 51,650 and in May 24,578 shares.