Hirco Restructuring Proposal Sparks Shareholder Dispute
Shareholders of Hirco, the AIM-listed real estate fund belonging to the Hiranandani group, find themselves divided on a proposed restructuring plan. This plan involves merging two real estate subsidiaries with Hirco, a move that has garnered both support and opposition within the investor base.
A source close to the Hiranandani group stated that approximately 90% of shareholders back the restructuring proposal, which originated from shareholders themselves. A board meeting is slated for later this month to finalize the decision. However, a vocal group of shareholders opposes the merger, fearing it will grant the Hiranandani group excessive control over Hirco.
Extraordinary General Meeting and Roadshows Planned
An Extraordinary General Meeting (EGM) is scheduled for January 16 in Mumbai, where shareholders will vote on the restructuring. Hirco plans to commence investor roadshows early next week to address queries and explain the rationale behind the restructuring.
Niranjan Hiranandani, chairman of the Hiranandani group, declined to comment, citing the silent period preceding the company's results announcement.
Concerns Over Shareholding Dilution and Control
British media reports indicate that the restructuring plan has drawn criticism from certain shareholders who believe it could dilute their holdings and effectively cede control to the Hiranandani family. Laxey Partners, an activist shareholder holding over 10% of Hirco, has emerged as a leading voice of dissent, labeling the plan "shocking and ill-conceived."
In a letter to fellow shareholders, Laxey Partners urged them to vote against the proposal. They argue that the plan involves injecting the Hiranandanis' loss-making development vehicle into Hirco while simultaneously granting the family an equity stake of up to 50.6% in the company. This move would also eliminate shareholders' preferential claim on £350.8 million of shares that currently offer a 12% annual dividend.
Details of the Proposed Merger
On December 18, the Hirco board proposed the merger, which entails Hirco acquiring two special purpose vehicles (SPVs) owned by the Hiranandanis. These SPVs are undertaking township developments in Panvel, near Mumbai, and in Chennai.
Hirco currently boasts a diverse investor base, including prominent foreign funds such as Standard Life (13.11%), HSBC Holdings (10.13%), Laxey Partners (10.05%), Halbis Capital (7.84%), Fortress Investment (4.57%), and Lazard AM (4.57%). The unlisted Hiranandani group possesses less than 20% of Hirco. However, if implemented, the merger proposal would increase the group's holding to over 50%.
Background on Hirco
Hirco was listed on the AIM in 2006, raising over £380 million to invest in residential properties across India.