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MNC investors miss out on post-offer gains

Mumbai, June 8: Small investors who sold their shares in response to offers from several multinational companies recently are dismayed at the way they have lost out on the fat pay-outs and stock gains after they left.

The parents made the open offers to tighten their grip on the MNCs, but shareholders who quit are agonising over the fat dividends dished out since then. The firms, they say, had never been so generous to them.

Consumer electronics major Philips turned around dramatically and compressor company Atlas Copco went on to declare dividends not seen before. In the case of Atlas Copco AB, which increased its stake in its Indian arm from 50.99 percent to 83.77 by buying shares at a price of Rs 243 each, the pay-out has been 340 per cent.

Around 16 per cent of Indian shareholders did not accept offers made by foreign promoters, who had permission to ramp up their shareholding to 100 per cent.

To ensure that there is a fair deal, Sebi has devised a reverse book-building system that allows small shareholders to dictate the price of shares being de-listed from bourses. However, few companies have used it.

Philips explained the offer in a manner that would give investors an impression that they would not benefit much if they stayed on: “Increasing competition in the company’s main lines of business, coupled with the existing economic scenario, implies there is need for further investment of significant resources and time. These long-term decisions are unlikely to result in gains for the company in the near term.” The firm staged a dramatic recovery the year after it acquired a shareholding of over 90 per cent in the company.

Angry investors at Atlas Copco’s annual general meeting held recently said many of them had no inkling, unlike promoters, that the company would declare a whopping special dividend of Rs 30 per share (300 per cent). This was in addition to a dividend of Rs 4 per share for the year ended December 31, 2002, taking the bonanza to Rs 34 per share (340 per cent). The company said the pay-out would cost it Rs 38.35 crore, up from the Rs 4.51 crore it paid in the previous year.

Shareholders complain the parent has got a windfall, sucking back in the first year a substantial sum of the money it spent on the open offer. The open offer saw the foreign company fork out Rs 89.85 crore, while its share of the dividend works out to Rs 32.15 crore.

The pain of a raw deal has triggered clamours for a pro-rata dividend, much like the planned 1 per cent commission of net profit for Atlas Copco independent directors, with retrospective effect from last calendar year.

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