The Subhash Chandra-promoted Essel Group has acquired over 13 per cent stake in the Hyderabad-based infrastructure company IVRCL through open market purchases.
And there are pointers that they may hike it further. With this, the Essel Group has two per cent higher stake in IVRCL compared to the promoter and promoter group of the company who hold 11.2 per cent.
According to available information, Essel Group had acquired about 10.2 per cent stake yesterday and added close to 3 per cent today. However, with the open offer cut off trigger going from 15 per cent earlier to 25 per cent now, there is potential for Essel to up its stake further in the company without triggering open offer.
In addition, the new norms require the open offer size of 26 per cent now up from 20 per cent earlier.
IVRCL's stand
When contacted, Mr R. Balarami Reddy, Executive Director of Finance, IVRCL, said, “While this is ok as an investment, we will fight it out if there is a proposal for hostile bid. Normally, when such investments are made, they get in touch with existing promoters, but this was not the case.”
Banking and financial institutions are with us, he said.
According to Karvy, “Essel Group investment is a huge positive for IVRCL due to the strategic intent as against investment by any PE firm, which is more financial in nature.
The company Chairman and Managing Director, Mr E. Sudhir Reddy, and core promoters are associated with the company since its inception about 25 years ago. They command an order book of Rs 26,000 crore.
The promoters had diluted their holdings over the years to raise funds and brought down their stake to 11.2 per cent.
According to a Karvy analyst, it will come down to who controls the board room. Other option for Mr Sudhir Reddy is to work closely with the group during the transition or become a sleeping investor. Or also possibly hold on to his stake in IVRCL and exit at an opportune time.
He believes that there is a low probability of this acquisition becoming hostile. There is high institutional stake of 44 per cent in IVRCL.
The company closed the day's trade at Rs 60.05 per cent, down 0.58 per cent.