FIs may opt for selling stake in Raasi Cements

MUMBAI, April 11: Financial institutions which were earlier opposing "hostile" takeovers are veering around the idea of selling th...

MUMBAI, April 11: Financial institutions which were earlier opposing "hostile" takeovers are veering around the idea of selling their stake in Raasi Cements to India Cements. The latter has already offered to buy the 20 per cent FI stake in Raasi at a price of Rs 300 per share.

FIs, especially the IDBI, were earlier not enthusiastic about selling their stake as the general impression was that the India Cement offer was a hostile takeover bid. The IDBI chairman S H Khan had gone on record saying that there was no question of supporting or funding a hostile takeover bid.

Now with Raasi chairman B V Raju himself succumbing to the pressure and selling his 32 per cent stake to India Cements, FIs have no other option but to sell their stake at the offered price of Rs 300 per share. "The current market price of Raasi is around Rs 149 per share. If they sell the stake to India Cements, their profits will double. It will be stupid to ignore the India Cements offer," said a source.

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According to an institutionalsource, as Raju has already sold his stake to India Cements, it cannot be any longer termed as a "hostile" bid. "The counter-offer which was expected from Raju never materialised. We will have to protect the interest of shareholders and institutions," he said.

If FIs sell their stake to India Cements, the latter’s holding in Raasi will go up to 74 per cent. Another 20 per cent would be collected through the open offer. With India Cements breaching the 90 per cent stake, the company can as per existing norms, delist Raasi scrip from the stock exchanges.

After signing the deal with the Rajus of Raasi, India Cements has said that they would like to buy the entire equity of Raasi at Rs 300 per share and make it a division. "Once the company is delisted, it will not be easy for shareholders who are holding the balance 10 per cent stake to dispose off the shares which are not listed on a stock exchange. The company will have to buy even shares above the 20 per cent offer limit," said a merchant banker. Theacquisition is expected to cost India Cements over Rs 500 crore. This will make it one of the most expensive acquisition in the corporate history. Institutions have already asked the company about the sources of funds for financing the acquisition. According to the company, part of the funds will come from a rights issue which has already been announced.

Another part is expected to come from internal accruals of the company. Even the acquisition at this rate is considered cheap as setting up a new cement plant with a capacity of 2.5 million tonnes will involve a capital expenditure of over Rs 900 crore.

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