The Securities and Exchange Board of India has initiated an enquiry into the allegations made by a few minority shareholders of the white goods major Electrolux Kelvinator Ltd in relation to a previous merger scheme, leaving the company's proposed Rs 200 crore (Rs 2 billion) rights issue hanging fire.
The issue may get further entangled with some minority shareholders, including erstwhile local promoter Harish Kumar, also filing a petition with the Company Law Board under Sections 397 and 398 of the Companies Act alleging acts of oppression, misfeasance and mismanagement by the management of the company.
Sebi has sought clarifications from both, the management of Electrolux Kelvinator as well as from Harish Kumar of Maharaja Appliances, said sources in the two companies.
Sources in Electrolux Kelvinator's merchant banker Ambit Corporate Finance said: "Sebi has sought certain clarifications, which we are responding to. The issue will be floated as soon as the matter is settled."
Electrolux Kelvinator had filed its prospectus for the rights issue with the market regulator on June 3.
Each shareholder will get 8 equity shares of Rs 10 each shares for each seven shares held. The company's current equity capital is around Rs 176 crore (Rs 1.76 billion).
But Harish Kumar, who holds a 10 per cent stake in the company, filed a petition in the Delhi High Court alleging that Sweden's AB Electrolux, the majority shareholder in the company, had misrepresented to the shareholders about the scheme of merger of Intron Ltd and Electrolux India Ltd into Electrolux Kelvinator Ltd, a listed company.
Kumar and his associates have alleged that the Swedish company not only merged loss-making Intron and Electrolux India - a wholly-owned subsidiary - into EKL which was turning around, it also sought to close down or sell several plants subsequent to the merger.
It has questioned that if AB Electrolux already had plans to shut down certain units such as the Intron washing machines facility, the Hyderabad-based compressor factory and the Nandalur unit, it should not have included their valuation in the scheme of merger.
Earlier this week, AB Electrolux also announced its plans to get out of the compressors manufacturing business worldwide.
The Delhi High Court has set July 17, 2003, as the next date for hearing the case. The status of the CLB petition, filed on June 17, could not be ascertained.
Kumar refused to comment on the issue, saying it was sub-judice. Electrolux executives could not be reached for comment.
The white goods major is among the market leaders in terms of volumes, but its losses have mounted.
The company has raised money through voluntary grants worth Rs 50 crore (Rs 0.50 billion) from its parent, and the rights issue is another source of funding.
