MUMBAI: Under fire from miffed institutional shareholders, Delhi-based billionaire Gautam Thapar's Avantha Group has decided to ease the burden of a recent aircraft purchase by power equipment maker Crompton Greaves to calm this set of influential investors.
Crompton Greaves, which had bought the aircraft for an estimated Rs 270 crore last fiscal, may sell the jet to an unlisted group entity at the price at which it was purchased, said two people familiar with the matter.
Top Crompton officials have been meeting fund managers of mutual funds and insurance companies that hold the stock to convey this decision. The two persons who did not want to be identified as they are not authorised to speak to the media said the latest move by the management is aimed at assuaging the feelings of these dominant investors, who were miffed by the company's decision to buy the aircraft at a time the company's profits were under pressure.
What irked shareholders all the more was the company's remarks terming the purchase as an 'investment'. "We are not concerned about who will be the buyer of the aircraft. All we are concerned about is whether Crompton recovers the entire money (Rs 270 crore) or not," said a fund manager with a private mutual fund and privy to the matter.
Stock hasn't recovered:
"It has been made clear to us that the company will get the entire money back," he said on condition of anonymity. Crompton Greaves reported a consolidated net profit of Ã¬888 crore for the year ended March 31, 2011.
In response to an ET questionnaire on this issue, a Crompton spokesperson said, "The company is looking at various options to dispose of the aircraft." Crompton shares plunged almost 44% in a month from July 19 â€” the day the company reported disappointing first quarter results and after a wider section of investors took notice of the jet purchase.
Investors and analysts have also been critical of the move by Crompton's nonexecutive vice-chairman, SM Trehan, to sell his entire holding between June 29 and July 1 after he stepped down as managing director on June 1.
The stock has not recovered since the tumble on worries about the company's business prospects along with investor discomfort over the aircraft purchase. Analysts, who have been tracking the company for long, said they have found it difficult to sell the Crompton stock idea to institutional investors, especially overseas, who found the company's corporate governance practices 'questionable'.
In an attempt to calm investors, Crompton's promoter â€” Avantha Holdings â€” has been mopping up the company's shares since mid-August.
Avantha had raised its stake in the company to almost 40% till September 15 from 39.16% on August 22 through regular purchases from the secondary market.
Nishanth Vasudevan & Rachita Prasad
Source: Economic Times