The promoter ofKennametal India Ltd (KIL) had fixed the floor price for its offer-for-sale of shares at Rs 435, which is at a steep discount to the market price.
The promoter — Kennametal Inc of the US — intends to divest 28.92 lakh shares through this auction route on Thursday on the BSE, the only exchange where the stock is listed. The stock closed on Wednesday at Rs 533.50, a loss of 6.5 per cent or Rs 37.65.
It was on January 31 the company had informed the BSE of its parent’s intention to prune its shareholding to comply with minimum public shareholding norm of 25 per cent.
At present, the promoters’ stake in the company is 88.16 per cent, FIIs 0.61 per cent, and domestic institutions 0.94 per cent, while others hold 10.29 per cent.
What holds key is how the market responds to the floor price announced after the market hours on Wednesday. It is possible that the gap between the market price and floor price of the stock might narrow on Thursday.
While the discounted offer is laudable in that it would attract new investors, it would erode the value of the holdings with the existing investors. Already, the stock has witnessed huge erosion in value from its 52-week high of Rs 1,247 it had touched on April 17 last year.
The wheel appears to have come a full circle for Kennametal India shareholders. After their proposal to delist the shares in 2010 through share buy-back was scuttled by the public shareholders who rejected the move, the promoters have now offered to part with a portion of their stake to comply with public shareholding norm.
The latest plan for stake dilution has come at a time when the parent company Kennametal Inc had expressed a desire to expand, modernise and relocate its operations and sought land from the Karnataka Government.