On December 5, Allcargo announced it was buying a controlling stake in Gati for Rs 416 crore. The deal includes purchasing 10.3 million shares of the promoter group, subscribing to a preferential issue of 13.3 million shares, and a further acquisition of 26 per cent through an open offer — all at a price of Rs 75 per share. After the deal, Allcargo will have 45.43 per cent in Gati.
Some of their complaints, such as the alleged undervaluation of Gati, do sound like shareholder activism even though high-profile institutional investors that own a considerable stake in the company seem to have no clue about it.
However, the dispute is pivoted on the ownership of shares they held in the company and the alleged usurpation of the bulk of those shares by the CEO through pledges that were subsequently invoked by the lenders.
On December 19, the mother and the sons requested Sebi
not to approve the open offer, citing the ownership dispute over the shares held by TCI (Transport Corporation of India) Finance, a promoter group entity, which is supposed to sell shares to Allcargo as part of the open offer.
On December 9, they filed an application before the NCLT, seeking an injunction on the sale of properties, including shares, held by TCI Finance in Gati, on similar grounds. They have in their defence a city civil court verdict, which ordered attaching 1.67 million shares of Gati held in Mahendra Agarwal’s name.
The open offer was endorsed by an overwhelming majority of shareholders of Gati at an extraordinary general meeting on January 8 even as Neera Agarwal and her sons, Dhruv and Manish, opposed it. The promoter group together holds 17.78 per cent in the company while the public has the rest.
Gati officials say the three family members of the promoter group would not lose anything because the shares held by them are untouched. But the family says it has much bigger concerns. “The deal is not in the best interests of the shareholders, nor was it aimed at enhancing shareholder value. It is designed to benefit just a single person — my father, Mahendra Agarwal. The issue of preferential shares will affect every shareholder, including us, and it was not done on a fair-value basis,” Manish Agarwal said.
According to Manish Agarwal, the company has been undervalued at Rs 915 crore when the fair valuation of Gati, including its investments, businesses, and immovable assets, cannot be less than Rs 2,000 crore even when conservatively estimated.
Gati was part of the assets of TCI, which was split among Mahendra Agarwal and his three brothers in 1998.
“There was a memorandum of family partition wherein all joint family wealth including shares of Gati, TCI, and other companies
were divided equitably between Mahendra Agarwal, his brothers, their wives, and children,” Manish said, alleging that his father proclaimed himself founder-promoter of Gati in a bid to exercise control over the shareholding of the promoter group.
“Tell me which company does not have disputes within its promoter group. It is their private matter while the company affairs are separate,” said a Gati official, asserting that the deal was on track and the process, including the open offer, will be over by March.