Friday, April 26, 2013


Are these MNC promoters coming out with a clear message? Give us your shares at our price, else we will short change you, and not even give you the current market price and the Indian merchant bankers will help us short change the Indian shareholders?

Since I got a lot of feedback on Fresenius Kabi, here comes the next important issue on the radar. Just look at how the minority shareholders of Saint Gobain Sekurit are being treated. Again, all of this is done within the letter of the law, but the spirit is nowhere to be followed.

Just a backgrounder – In 2012, the promoters of Saint Gobain Sekurit came out with a delisting offer and indicated a price of Rs 31/share as acceptable to them. The discovered price, to their horror was Rs 90/share and even at that price, not enough investors tendered and hence the company rejected the delisting. Of course, even the shareholders got greedy and may be Rs 90/share was not the right price for Saint Gobain but what they are getting now is clearly not the right value. 

Now look at what's happening. The same promoters have another company called Grindwell Norton (which is much bigger in size) and now they are merging the 2 companies. But the merger ratio leaves so much to be desired.

A simple stock price related swap would have meant 1 share of Grindwell for every 11 shares of Saint Gobain. Even in terms of sales, Grindwell is 9 times bigger than Saint Gobain. And in terms of market cap, Grindwell is 7 times Sanit Gobain. But look at the merger ratio – 17 shares of Saint Gobain are needed for a small mercy of 1 share of Grindwell Norton.

Simply put, if you have shares worth Rs 380 of Saint Gobain, you will get a share of Grindwell worth Rs 255. That’s a loss of 33%, technically the share of Saint Gobain is now worth Rs 15/share. It’s the same company, where the promoters were happy to delist at Rs 31/share.

And more importantly it does not end here. The merger process also involves merging 2 unlisted companies with Grindwell Norton and you don’t need knowledge of rocket science to know that these 2 companies should be promoter entities and look at the merger ratios here

For every 1 share of unlisted Saint Gobain Crystals, you get 2 shares of Grindwell Norton and for every 1 share of unlisted SEPR, you get 2.6 shares of Grindwell Norton. So technically, the assets of Grindwell Norton are being distributed among the shareholders of unlisted companies while the minority shareholders of the listed entity are being given the loose change.

In the listed Sanit Gobain Sekurit, the MNC promoters own 86% stake with no institution holding and the balance 14% stake is with small shareholders. In Grindwell Norton, promoters own 58%, has large institutional holding with both domestic mutual funds and FIIs listed as shareholders.

Do the promoters of Saint Gobain Sekurit have absolutely zero regard for the minority 14% shareholders of the company? It’s a 200 crore market cap company so 14% represents a princely sum of Rs 28 crore. Why can’t they be fair to these small investors? Or is this the new way of MNC promoters bullying small shareholders and telling them – it’s either our way or highway.


  1. Superb article. Isn't SEBI listening.

  2. Excellent!Many MNCs while wanting to delist are adopting such schemes to shortchange not only the minority shareholders but the regulator too.Moreover, Sebi should look whether this is in compliance with the law. As per listing agreement, a company with more than 75% promoter shareholding can adopt certain methods to reduce their stake and merger with any another company is not one of them. I think other MNCs also will follow the similar tactics. All this tells us why investors are keeping away from stock market.

  3. 1 question- Mgt has more stake in Saint Gobain (86%) as compared to Grindwell (58%), so why are they doing a deal which is worse for them also?

  4. If you had 1 BHK in worli and 3 BHK in let's say ambernath, where would your interest lie more? 85% of 200 crore or 56% of 1400 cr?

  5. I consider right now as a good opportunity to buy Saint Gobain Sekruit as merger with Grindwell is certainly benefit same in long run. Losses can be adjusted and Grindwell promoters holding will go up.
    If you want to buy Grindwell for long term investments better buy Saint Gobain so that you get good discount in the bargain at current market rate.