Many displeased over Rights Issue

H.D.H Senewiratne

Many minority/independent shareholders have expressed their displeasure over the recently concluded Rs. 1 billion Rights Issue of Renuka ShawWallace Plc’s .

“The Rights Issue was very unfair un-reasonable and aggressive for independent/minor shareholders because of the huge requirement of additional capital which had to be raised within six weeks,” a leading good governance activist and independent shareholder A.C. Vignarajah told Daily News Business.

He said the company sought to raise as much as twice the initially stated capital within a short period of time which took over 3,000 shareholders aback.

Vignarajah alleged that ‘control interests’ including directors, managers and multi- link related parties had ample planning time for the Rights Issue, while the minority/independent shareholders were deprived of retained earnings.

The company announced that it raised Rs. 831.4 million via the Rights Issue, as opposed to the planned amount of Rs. 1 billion.

The Rights Issue was on the basis of 5 for 4 for both voting and non-voting at Rs. 35 and Rs. 28 respectively. Of the voting segment, the subscription was 86.2 % or Rs. 815 million out of Rs. 945 million, and non-voting subscription was very low, 26 % or Rs 16.4 million, out of the originally planned Rs. 63 million.

The company said 23.28 million new voting shares and 586,673 non-voting shares were listed. Vignarajah said that the original rights envisaged 27 million of voting and 2.25 million of non-voting shares. Post-Rights Issue, a sub division of shares into two is pending as well based on the shareholding as at end of trading on January 3, 2013.

Despite the under subscription, the price of the company’s voting share gained by 40 cents to Rs. 36.40 whilst that of the parent Renuka Holdings dipped by 70 cents to Rs. 36.10. However, Managing Director Shamindra Rajiyah was unavailable for comment.

Vignarajah said that every Rs 35 single share was paid only a Rs 3 dividend for the last five years which is insufficient.

The major shareholders of COC are Renuka Agro Exports (50.6 %), J. B. Cocohell (5.4 %), Renuka Hotels Ltd., (3 %), investor K.C. Vignarajah (3 %) and Capital Alliance (2 %) as of end of September 2012.