Kolkata: Warren Tea Ltd, one of India’s oldest plantation companies, on Wednesday said it would issue bonus shares to non-promoter shareholders to comply with the requirement for listed companies to bring down their promoter holding to 75% by June.
This is similar to what Gammon Infrastructure Projects Ltd did last month.
The promoters of Warren Tea, which is currently being restructured, hold 83.5%. The proposed bonus issue, under which seven shares are to be allotted for every 10 held by minority shareholders, would pare the promoters’ holding to 74.9%.
Warren Tea’s promoters—the Ruia and Goenka families of Kolkata—are in the process of partitioning the company after having briefly fought a legal battle over management control. They resolved their differences last year.
Within four to five months, Warren Tea will be split into two firms, with each owning seven gardens in Assam. Internally, for operations, the company has already been carved up between the two families—they already have independent control of the gardens that are going to be run by them after Warren Tea is carved up.
“This is a good gesture from both divisions (the Ruias and Goenkas),” said Ankit Ruia, a whole-time director. “While complying with Sebi’s (Securities and Exchange Board of India) norm of reducing promoter holding to 75% by June, we chose to recognize our public shareholders for their contribution to the company.”
These shareholders have not received dividends from Warren Tea for the past few years. Because of the spat between the promoters, the management could not prepare financial results, said another key official at Warren Tea, who did not want to be identified.
“So we figured out a way to compensate the minority shareholders while complying with the requirement of bringing down promoters’ ownership to 75%,” he added.
The company’s shares have gained Rs.82.10 apiece, or 23.28%, on BSE in the past seven trading sessions since Warren Tea announced after the markets closed on 21 January that its board would meet on 30 January to consider a bonus issue. The Sensex declined 0.5% during this period.
On Wednesday, Warren Tea’s shares extended gains by Rs.20.95, or 5.06%, on BSE to close at Rs.434.75 each, while the Sensex closed at 20,005 points, up 14.1 points, or 0.07%.
On Wednesday, Warren Tea also announced its audited financial results for the year ended 31 March 2012, reporting a net profit of Rs.5.96 crore, lower than the previous year’s net profit of Rs.20.6 crore, because of a sharp spurt in expenses on employee benefits.
Though the financial results for fiscal 2012 are “not too impressive”, the fact that the company has finally managed to prepare them shows that the promoters have sorted out internal differences, said Paras Bothra, vice-president, equity research, Ashika Stock Broking Ltd. “The partition of the company going forward is expected to result in significant value unlocking for minority shareholders,” he added.