Mumbai, October 21: If you're wondering why Tata chieftain Ratan Tata went to lobby with SEBI chief on behalf of Nusli Wadia, it wasn't just because he's a fellow Parsi. Tata, in fact, was joined in this by jeep major Kesub Mahindra, for a very straight-forward reason: with the prices of old-economy stocks at all-time lows, most of these companies are just waiting to be picked up by raiders such as Arun Bajoria who's giving Bombay Dyeing's Wadia many sleepless nights. Thus, the share price of Telco has fallen to just Rs 74, taking its market capitalisation to a shocking Rs 1,895 crore. To buy a 26 per cent stake at current prices requires just Rs 492 crore - to buy the Tata's 22.8 per cent stake requires just Rs 432 crore. To buy 26 per cent of the Muthiah's SPIC requires just Rs 21 crore, Rs 23 crore for B.K. Birla's Century Enka, and so on. In real life, to be sure, the costs of acquisition will be higher than these. For instance, if you buy Telco, you have to inform the stock exchange when your holdings cross 5 per cent, and that's usually a trigger to jack up prices. And, once holdings cross 15 per cent, you have to make an open offer to buy another 20 per cent shares from the public. At this point, if the promoter makes a counter offer, prices will go up again. Even so, the cost of such acquisitions is still a fraction of the cost of setting up a greenfield unit. So once a raider acquires a 26 per cent stake - which, under the law, will ensure he can never be kicked off a company's board - he is in a very good position to control the firm. More so, because in a large number of cases, the promoters share is even below this critical 26 per cent. The Tatas own just 22.8 per cent of Telco, 19.72 per cent of Tisco; the Birlas own just 23.7 per cent of flagship Grasim; the Sheths just 13 per cent of Great Eastern Shipping, the Muthiahs 18.5 per cent of SPIC, and so on. Not surprisingly, the war has already begun. The Sheths of Great Eastern Shipping are fighting with Delhi-based Renaissance Estates Ltd (REL) for Gesco Corporation and the Oberois of East India Hotels are not sure if the acquisition of a major stake by ITC which runs the Welcome group of hotels is supposed to mean something significant. Share prices of many big companies have fallen by over 50 per cent in the last six months. Stocks of Tata-run Telco, for example, are currently quoting at 10-year lows of Rs 74-75. Tata Steel, another group firm is quoting at around Rs 90 as against Rs 183 some months ago. Grasim Industries, belonging to the Kumar Mangalam Birla group, is also near to the 52-week level of Rs 161 against Rs 554 a few months ago. Larsen & Toubro also touched the year's low level of Rs 155 from Rs 630. `With share prices quoting at year's low levels, this is the best time to acquire shares of good companies. I wouldn't be surprised if some more big blue chip companies are targeted by corporate raiders,' warns Bombay Stock Exchange broker Pawan Dharnidharka. The SEBI rules are also skewed in favour of the raider. It is easier for an outsider to mount an offensive than an insider to defend his own turf. `Today a raider can keep acquiring shares up to 15 per cent of a company equity without having to make an open offer, whereas a promoter can raise his holding in his own company by only five per cent every year through the creeping acquisition route, this is unfair,' said Assocham president Shekhar Bajaj. Looking at the promoter holding and current market prices, it is clear that most of the Indian business groups are vulnerable for takeover. The Tatas, the Birlas, the Thapars, the Singhanias and so on control their companies with stakes ranging from 15 per cent to 40 per cent. Azim Premji who runs Wipro, the largest infotech company in India, is one of the few promoters in the big league who is not vulnerable to any takeover. Premji controls nearly 85 per cent of the equity holding in Wipro which tops in market capitalisation at around Rs 44,000 crore. ``Promoters need to have 51 per cent holding to be comfortable. Otherwise things can go haywire any time,'' admits an official of a Tata company. Indian subsidiaries of multinational companies are the only ones sitting tight watching the drama being enacted in the corporate sector. Foreign parents of companies like Hindustan Lever, Colgate and Prcoter & Gamble have already increased their equity stakes to 51 per cent.Seeing the writing on the wall, worried business captains have started lobbying against hostile takeovers. The Confederation of Indian Industry (CII) today urged the Sebi for an urgent review of the takeover code and strengthen regulations, especially in the case of creeping acquisitions, in the wake of the raging corporate battle. With corporate raiders breathing down the necks of traditional business families, almost all industry bodies have come out in favour of tightening rules. Many of them are also planning to shore up their holdings by buyback and creeping acquisitions.
