Pune-based Deepak Fertilisers & Petrochemicals will finance the proposed acquisition of an additional stake in Mangalore Chemicals and Fertilizers (MCF) through internal accruals, according to a company spokesperson.

The Sailesh Mehta-run company has already invested ₹188 crore to pick a 25 per cent stake in Vijay Mallya-controlled MCF. It now proposes to spend ₹288 crore for an additional 26 per cent through the ongoing open offer at ₹93.60 a share.

The total cost of the proposed acquisition is pegged at ₹474 crore at an estimated price of ₹78 per share.

No more price war

Contrary to market expectation, Deepak rules out any further revision in the open offer price. Expectation of a further price revision saw MCF stock zooming from ₹73 (September 25) to ₹101.40 (October 1).

Meanwhile, in an advisory issued on October 1, brokerage firm Ventura Securities held that at the open offer price, MCF shares are valued more than 15 times its earning per share (₹6.18), “which is significantly higher than its historical average as well as its peers”.

Stating that the open offer is based on “stretched valuations”, Ventura recommended investors in MCF to make a quick exit.

Urea subsidy

Deepak Fertilisers seems to be unperturbed by the recent controversy concerning MCF with regards to subsidy for naphtha-based urea production.

Following a March 2007 guideline, MCF converted its naphtha-based facility into a dual-fuel plant.

However, the company could not shift to gas-based production due to delay on the part of other agencies in ensuring gas supplies.

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