Crompton shareholders act tough, want money back

Share holders activism seems to be picking up in the corporate world as they have started monitoring the activities of promoters. While last month the share holders of Unitech rejected the managements proposal for a dividend outgo of Rs30 crore for the fiscal 2010-11, this month, the institutional shareholders of Crompton Greaves are upset with the the company’s purchase of a new aircraft, as reported in the Economic Times .

As per the article, institutional shareholders were upset with the company’s decision to buy the aircraft at a time when its profits were under pressure. But, what really miffed them was the company’s idea of terming the purchase as an ‘investment’.

In order to pacify the situation, the Avantha Group (promoter company) has decided to buy the aircraft from the company. Crompton Greaves had purchased the aircraft last yearfor an estimated amount of Rs 270 crore, said the ET article. They have also started increasing their stake in the company as they recently mopped by a substantial chunk of shares through the secondary market.

" All we are concerned about is whether Crompton recovers the money or not" said a fund manager on conditions of anonymity to Economic Times.

Crompton Greaves seems to be caught at the wrong end of the stick. In July, news about its former CEO and current non-executive vice-chairman Sudhir Trehan selling off his entire holdings in the company for Rs4.69 crore came as a surprise.

Owing to its poor financial performance and concerns about slowing growth, the stock price has crashed by 55.4 percent over the last one year compared to the BSE Sensex which has fallen by 20 percent.

In the June 2011 quarter, the company had reported a muted growth in sales at 5.9 percent while net profit fell at a steep pace of 59 percent.

You can read the entire Economic Times report here .