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OMDC in search of independent directors to fulfil listing intent

OMDC in search of independent directors to fulfil listing intent
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First Published: Wed, Feb 03 2010. 09 28 PM IST

Photograph: Indranil Bhoumik/Mint; graphic: Ahmed Raza Khan/Mint
Photograph: Indranil Bhoumik/Mint; graphic: Ahmed Raza Khan/Mint
Updated: Wed, Feb 03 2010. 09 28 PM IST
Kolkata: State-owned iron ore miner Orissa Minerals Development Co. Ltd (OMDC) has asked the Union government to appoint independent directors on its board so that it can list its shares on the Bombay Stock Exchange.
At least half of the directors in a listed firm’s board have to be independent, according to rules set by markets regulator Securities and Exchange Board of India (Sebi).
OMDC has only one independent director on its five-member board. Though its shares are traded on the Calcutta Stock Exchange (CSE), it was listed on that bourse before Sebi set its rule on independent directors.
Photograph: Indranil Bhoumik/Mint; graphic: Ahmed Raza Khan/Mint
“The process of appointing independent directors is on,” said Champak Banerjee, director, finance, at OMDC.
The Union government is yet to take a decision on the matter, according to steel secretary Atul Chaturvedi.
“Currently, the Bird Group is going through a restructuring,” he said. “Our main concern now is to complete it by the end of this fiscal.”
OMDC is part of the Bird Group, which was earlier controlled by Bird and Co. Ltd, a managing agency for UK investors. The firms were taken over by the Union government after it abolished managing agencies in 1970.
OMDC is by far the most valuable company in the group. It holds six iron ore mines on lease, which have a combined reserve of around 200 million tonnes (mt). In fiscal 2009, it mined 1.66 mt of ore and posted a net profit of Rs181.81 crore on a turnover of Rs346.89 crore. The company has in its coffers Rs718 crore in cash and liquid assets, which translates to cash per share of around Rs12,000.
The Union government has recently decided that cross holdings among Bird Group companies would be liquidated, and Rashtriya Ispat Nigam Ltd will be given control of all firms in the group.
After almost 24 years, trading in OMDC’s shares restarted in Kolkata on 17 October. However, the exchange has imposed strict margin requirements on transactions in the OMDC scrip. People selling the miner’s shares are required to deposit them with the bourse in advance and those buying need to pay 100% margin upfront.
There was no trading in the firm’s shares on Tuesday and Wednesday; on Monday, only 25 shares changed hands in one trade at Rs21,310 apiece.
The problem of not having independent directors isn’t unique to OMDC, according to Molly Thambi, managing director and chief executive officer of CSE. The exchange agreed to restart trading in OMDC’s shares after the company convinced the bourse that it was taking necessary steps to appoint independent directors, Thambi said.
Public holding in OMDC is 51.82%, yet shareholders do not have an exit opportunity because the company doesn’t have independent directors, said Vinay Bagri, whose family owns shares in the company. “This is ridiculous,” Bagri said.
“I tried to sell as few as 50 shares, but didn’t manage to. The process is so cumbersome,” said Hitesh Raja, a Mumbai-based chartered accountant who inherited the shares from his father.
To list shares on BSE, OMDC may also have to increase its paid up equity to at least Rs3 crore—which Banerjee said would not be a problem—besides appointing at least three independent directors. The company has a paid up capital of Rs60 lakh.
aveek.d@livemint.com
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First Published: Wed, Feb 03 2010. 09 28 PM IST