Minority shareholders say that the proposed transfer of the manufacturing unit will make ZACL merely a holding company, holding shares of many subsidiaries and Associates Company with hardly any business remaining in ZACL. It is a known fact that any holding company is always traded to a substantial discount to its intrinsic value.
Finquest group is one of large minority shareholders and has conveyed its dissent and concerns for the way in which minority shareholders of ZACL are treated. Subject to revaluation of the plant of ZACL, they suggested that Paradeep Phosphates Ltd. should be merged with ZACL, which is a listed entity and have other valuable investments as well.
In fact, Paradeep Phosphates will get benefit of existing banking arrangements as well as support of existing infrastructure. Also, 20 per cent Equity holding in Paradeep Phosphates held by Government will become liquid as it will be listed, Finquest suggested.
It is learnt that they also seem to have been contacted by investor advisory firms who are of similar opinion that this transaction is totally against and prejudicial to interest of minority shareholders.
If promoters, because of dominant shareholding carry out his ill motivated plan, minority shareholders say will have to approach appropriate legal forum for protection of their interest and rights. Shareholders approaching the government are not ruled out as the Government of India is a 20 per cent shareholder of Paradeep Phosphate.
Alternatively, they are learnt to have suggested distribution of shareholding of various subsidiaries and associates i.e Paradeep Phosphate (and get the same listed), Mangalore Chemical and Fertilisers to the shareholders of ZACL.
Shareholders say that ZACL and its associate companies could not reach their true potential after the death of K.K. Birla, who founded the company.
In the recent past, ZACL could not meet financial commitment to its bankers which resulted into downgrading of its credit rating by rating agencies which in turn led to recall of loans by its bankers. This also resulted into closure of its manufacturing operation in NPK-B plant from April 27, 2019 as the company was not having funds to purchase raw materials.
"It is unbelievable that the company which promoted and managed another company Chambal Fertilizer and Chemicals Ltd, whose operations are very profitable, had to close down operation due to unavailability of finances which many shareholders allege to be mismanagement of ZACL by its promoters. The financial performance for the last 8 quarters of ZACL speaks for it," according to shareholders.
ZACL, announced its 4th quarter results on June 21 with a note which has not only surprised but also anguished minority shareholders. "In October 2019, with a view to building a large fertilizer company with access to both Phosphates and Nitrogenous fertilizers and to access the markets serviced by the Company, it proposed and OCP group agreed to evaluate Company''s Goa plant for a merger into or slump sale to Paradeep Phosphates Limited (PPL) on both Strategic and financial grounds."
"With this objective in mind, reputed advisors were engaged both by the Company and OCP group. After detailed discussions, both Company and OCP have recently agreed to a valuation of US $280mn for the Goa plant of the Company. This transaction would bring in long term funds in the Company and would take care of long-term Liabilities of the Company.
Both the parties have also agreed that the said valuation is subject to a confirmatory due diligence to be undertaken by PPL for purchase of Goa Plant of the Company and other legal requirements, including approval of Government of lndia," the note said.
It may be noted that presently, the Company and OCP hold 50 per cent each of the total equity capital of Zuari Maroc Phosphates Private Limited (ZMPPL) and ZMPPL holds 80.45 per cent of the Share capital of PPL.
Shareholders have been totally taken by surprise and anguished by the above intention of promoters of the company, which is effectively leading ZACL to be only a holding Company, holding shares of various group entities. "The act and intention of heirs of K.K. Birla viz. Saroj Poddar who was instrumental in promoting Gillette India Ltd., venture with the renowned ''The Gillette Company,'' US, lead to the Minority shareholders being anguished with intention of Mr Saroj Poddar in respect of ZACL," shareholders said.