In a decision that could lead to the winding up of Trikona TrinityCapital, the shareholders of the AIM-listed Indian real estate fund have passed a resolution asking the company to "dispose of all its assets in an orderly fashion." The resolution was taken at its Extra-ordinary General Meeting held on March 24. Last month, Trikona Trinity announced that one of its major shareholders had proposed that the fund dispose off all its assets immediately.

The resolution was proposed by activist hedge fund QVT Financial, which holds a 27% stake in the firm. Another hedge fund, Carrousel Capital, holds a 14.3% stake in the firm. Trikona Trinity Capital is one of the funds managed by Trikona Capital.

The EGM decision would be a huge blow to the real estate fund which is already reeling under recession. Also it is to be seen what this ruling holds for other Indian real estate fund listed on London's Alternative Investment Market (AIM). Other AIM-listed real estate funds include Hirco, Ishaan Real Estate Fund, and Eredene Capital.

The resolution adds that if ordinary share price is below Net Asset Value (NAV), the company shall return capital to shareholders immediately. The current NAV as of 30 September 2008 is at 138 pence. The share price reacted positively to the news, rising by more than 26% to 30.50 pence, which is below the NAV.

The company has also passed a resolution stating that Board is authorised to purchase and cancel up to 70% of the company's ordinary shares through general share buy back or tender offer. Trikona Trinity's two board members - Rak Chugh, founder and managing director, and Andrzej Sobczak, non-executive director and chief operating officer of Carrousel Capital - are also stepping down.

Martin Michael Adams, who sits on board of number of funds including India-focused Kubera Cross-Border Fund, has been recommended by QVT Financial to join Trikona Trinity's board.

"As a result of today's EGM, the investment policy will change such that the company will promptly but having due regard to all applicable legal, governmental and regulatory restraints dispose of all of its existing assets in an orderly fashion," said Michael Cassidy, Chairman of Trikona Trinity Capital PLC.

India's Foreign Investment Promotion Board (FIPB) has put a three year cap before investors can sell their investment in real estate. The sale of investment even from one non-resident to another is not allowed, which means that Trikona Trinity will have to wait before its starts selling its investments. Trikona Trinity's investments have been made over a period between October '06 and June '07, according to its annual report.

Also Trikona Trinty's investments are being developed with real estate partners, and some of them have other private equity funds as co-investors. It has earlier said that the sale might run into a serious risk of legal action from Trikona's partners as well as the Government of India if QVT's resolutions are passed.

Trikona Trinity will be the second Indian victim of shareholder activism on AIM. KSK Emerging India Energy Fund (KEF), a £100 million fund listed in AIM, was recently wound up after the shareholders passed a resolution demanding the same.

Another Indian real estate fund that is facing heat is Hirco, promoted by realty major Hiranandani group, whose shareholders are demanding a non-Hirnandani Chairman.

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