The Hindu Business Line : Will Coromandel interest trigger open offer on GFCL?

IS the frequent acquisition of shares of Godavari Fertilisers and Chemicals Ltd (GFCL) by the Chennai-based Murugappa group-controlled Coromandel Fertilisers Ltd (CFL) fast heading towards an open offer to the shareholders of GFCL?

The pace at which the GFCL shares were being acquired in recent times by Coromandel through market purchase route strongly suggest the early possibility of an open offer, according to market sources.

The acquisition of the Rs 994-crore GFCL by the Rs 679-crore CFL would enable Murugappa group emerge as one of the largest fertiliser manufacturers in the subcontinent.

At present, the uncertainty seems to hover only on whether the open offer would come after Coromandel touched the 15 per cent equity holding mark in GFCL's Rs 32-crore equity or when the Murugappa group entity concludes a deal with the two major stakeholders of the State-owned GFCL - the Andhra Pradesh Government, which holds 26 per cent equity, and Indian Farmers Fertiliser Cooperative Ltd (Iffco), holding 25 per cent stake.

Confirming the latest market rumours and media reports, the Coromandel Fertilisers management said it has acquired around 8.5 lakh shares of GFCL through market purchase route during this calendar year.

Responding to the queries of stock exchanges, Coromandel said it had purchased three-lakh shares on January 7, 1.5-lakh shares on January 27, one-lakh shares on February 14 and three-lakh shares on February 25, taking the total shares acquired during this period to 8.5-lakh shares. This amounts to a fresh acquisition of 2.65 per cent holding in GFCL's Rs 32-crore paid-up equity capital.

Earlier during December last, Coromandel said it acquired 2,07,500 shares of Godavari Fertilizers amounting to 0.64 per cent of total paid-up capital. Following this, the total shareholding of Coromandel in GFCL stood at 32,97,790 shares amounting to 10.3 per cent of total paid-up capital of GFCL.

As a result of the fresh acquisition during January and February, the total holding of Coromandel in GFCL stands increased to 12.95 per cent.

According to the market sources, the Coromandel management may acquire another 2.04 per cent holding in GFCL, taking the total holding to 14.99 per cent, and then weigh the options of going in for open offer to the public to acquire 20 per cent from them or to acquire the holdings of the AP Government and Iffco.

"The sizable holding in GFCL without triggering the open offer mark of 15 per cent holding will enable the Coromandel management to effectively negotiate with both the AP Government and IFFCO for acquiring majority holding in the company."

The Murugappa outfit had openly admitted its plans to acquire control over GFCL and said it was awaiting the AP Government to divest its stake in the company.

Meanwhile, the Implementation Secretariat of the AP Government, the body supervising the divestment of State holdings in various enterprises, is learnt to have sought the opinion of Iffco on divesting its holding of 25 per cent in GFCL so that both the parties together can bargain for a better price from the Murugappa company for offloading their combined stake of 51 per cent.

The GFCL stock, which recorded a year's highest price of Rs 37 and the lowest of Rs 11.25 on the National Stock Exchange (NSE), is currently hovering around Rs 32.

Even if the State Government and Iffco manage to sell their holding at the year's highest price, the Murugappa company would still be in a position to acquire control over GFCL with an investment of less than Rs 60-crore, sources pointed out.

As at the end of last fiscal year, Coromandel had close to Rs 200 crore of reserves and surplus.

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