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As the closing date for tendering shares under the open offer closes on Wednesday, shares of Coimbatore-based Shanthi Gears Ltd (SGL) declined sharply on Tuesday.
The open offer price to acquire shares from the public shareholders was Rs 81, and the shares closed at Rs 66.85 (face value Re 1) on the NSE. Apart from the date of closing for the open offer being so near, another reason for the stock price to decline could be that its Q2 results may not have inspired the markets.
Tube’s acquisition
The Tube Investments of India Ltd (TIIL) of the Murugappa Group, which had acquired the 44.12 per cent stake of the former owner of SGL, had come out with an open offer to acquire up to 26 per cent stake from the public shareholders of the company.
The offer to tender shares opened on October 16 and will close on October 31. As those who wanted to tender their shares would have already done so, others who did not participate in the open offer are apparently diluting their holdings.
The possibility of all the shares offered not being accepted may have also weighed in with the investors in view of the fact that TIIL planned to acquire just 26 per cent of the shareholding from the public though the non-promoters’ holding was a high 55.88 per cent.
This may result in the acquirer accepting shares offered on a proportionate basis, unless it chooses to accept all shares offered. The reason for heightened interest could be the stock price has surged from a low of Rs 30.70 on December 20, 2011, to a high of Rs 76.50 on October 3 this year and the open offer price was still higher.
May correct further
In Q2 of 2012-13, the income from operations declined to Rs 39.56 crore (Rs 42.71 crore) and the net profit also fell marginally to Rs 5.72 crore ( Rs 7.12 crore).
K. Annamalai, former President of Coimbatore Stock Exchange, felt that the chances of the stock correcting a bit more before stabilising could not be ruled out.
He said the TIIL appear to have paid a higher amount for acquiring SGL because of the synergy it saw in the operations of both companies.
He expected the initial hiccups of bringing a proprietary company under professional management to be sorted out in a few months.
> yegya.narayanan@thehindu.co.in
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