For investors in Vijay Mallya’s UB Group-controlled Mangalore Chemicals and Fertiliser Ltd, the last six months has been a roller coaster ride. And, chances are, they may have to live with this uncertainty for some more time to come.

From a 52-week low on March 28, the stock touched a high of Rs 73 on July 12, riding on open market acquisition campaign by rivals Saroj Kumar Poddar-controlled Zuari Fertilisers and Chemicals (a subsidiary of listed Zuari Agro) and Sailesh Mehta-led Deepak Fertilisers and Petrochemicals Corporation Ltd.

But, just when the race was expected to reach a conclusive stage, uncertainty has struck the MCF counter again.

Having reached the threshold market acquisition level of 24.46 per cent stake on July 3, Deepak is yet to take a call on making an open offer. Zuari, which in April was the first to throw its hat in the ring for the Rs 2,780-crore Mangalore-based company, called off the stock market campaign in the third week of July.

Takeover possibilities

While both sides were waiting for Vijay Mallya’s nod to seal a ‘friendly’ acquisition deal; the UB group, which controls MCF with 22 per cent stake, half of which is pledged with lenders, ruled out any possibility of a takeover.

“I intend to keep MCF within the UB Group fold,” Mallya told reporters on September 25, adding that “if either Saroj Poddar or Sailesh-bhai” was willing he could buy out their stake.

The uncertainty is telling on the MCF share price. As on Tuesday, the stock closed at Rs 51.05 on the BSE, Rs 11 a share lower than the acquisition cost of Deepak — Rs 62 — but slightly higher than the price paid by Zuari — Rs 50 (approximate).

Therefore, while Zuari is still enjoying the first mover advantage, Deepak is under pressure to either seal the deal in its favour or end up holding a loss-making investment portfolio.

Industry sources say Deepak is desperate to clinch the deal and is keeping in touch with Mallya. But there the final outcome is anyony’s guess.

Third alternative

Theoretically, there is also a third alternative before Deepak. It may sell its stake to Zuari at a profit. But, Poddar has not expressed any interest in acquiring Deepak’s stake so far.

Instead, Poddar is keen to either enter into a ‘friendly’ deal with Mallya, or make a handsome profit out of his investments in MCF.

He has done the same in the past following a failed attempt to acquire Nagarjuna Fertiliser.

“We will give him (Mallya) time, till December, to make up his mind... I will not force him to divest but, sell shares to the highest bidder,” Poddar told Business Line on September 15.

And, since then, Poddar confirms, there have been no discussions between the two on the issue.

Unusual provision

According to Poddar, who has the first right of refusal on the UB group holding, an unusual provision in the articles of association allows UB to have three directors on the board of MCF for a minimum of 15 per cent holding in the company.

This means, convincing Mallya is imperative, for both Poddar and Deepak, to gain control of MCF.

But, will he be interested in divestment?

Mallya’s denial notwithstanding, market sources feel he will finally acquiesce, but, for a fortune. The question is, who will be able to match his expectations — Poddar or Mehta?

For the moment though, sources say, Mallya may be struck with the July 23 order of the Karnataka High Court that bars United Breweries Holdings Ltd (UBHL) from transferring or parting with possession of any of its assets.

Mallya controls MCF through four companies UBHL (15.05 per cent), United Spirits Ltd (0.01 per cent), McDowell Holdings Ltd (4.92 per cent) and Finvest India Ltd (2.01 per cent).

> pratim.bose@thehindu.co.in

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