The Arun Bajoria - Bombay Dyeing Tussle

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Case Details:

Case Code : BECG029
Case Length : 7 Pages
Period : 2000 - 2001
Pub. Date : 2002
Teaching Note : Available
Organization : Hooghly Mills Company Ltd, Bombay Dyeing, SEBI,FICCI
Industry : Financial Services
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"This has hurt my ego. I will exercise my full rights and let them try and see how much nuisance I can create."

- Arun Bajoria, on his voting rights being frozen by Bombay Dyeing, in November 2000.

"We know how to defend ourselves."

- Bombay Dyeing sources in October 2000.

The Bajoria Stake Hike

In October, 2000, the atmosphere at Neville House, Mumbai, official headquarters of Indian textile major Bombay Dyeing (BD) was extremely tense.

The man responsible for this was Arun Kumar Bajoria (Bajoria), chairman of a little known Kolkata based jute company, Hooghly Mills Company Ltd.

Bajoria, a jute dealer-cum-professional stock market speculator, had announced that his equity stake in BD had crossed the 15% limit set in the Securities and Exchange Board of India (SEBI) takeover guidelines.¹

The announcement attracted immense media coverage. BD accused Bajoria of having violated SEBI guidelines, which laid down that once a person's equity stake exceeded 5%, he had to inform the company concerned.

BD lodged a complaint against him with SEBI.

The Bajoria-BD tussle intensified over the next few days, with the Finance Minister Yashwant Sinha saying that the issue had underlined the need for amending the takeover code to make it foolproof. The controversy even divided the chambers of commerce and industry, with Meanwhile, Bajoria revealed his plans to claim a seat on the BD board and to have Nusli Wadia (Wadia), BD's Chairman removed on charges of mismanagement: "I had filed a case with the CLB under Sections 396 and 397 for mismanagement in BD by Mr. Nusli Wadia and will demand his removal from the Board." He also demanded the appointment of an external auditor to probe instances of mismanagement by Wadia...

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1] SEBI was set up to protect the interests of investors in securities and to regulate and promote the development of the securities market. The takeover code allowed the promoters to raise stake in their firms through creeping acquisition of up to 5% annually. Non-promoters had to notify stock exchanges and the company within four days of picking up 5% stake before the subsequent provisions of the takeover code came into force. On reaching 15%, non-promoter investors had to make an open public offer for purchase of at least 20% of the equity at a pre-determined price.