MUMBAI, April 10: The open offer by the promoters of Rs 2,500 crore Videocon group to acquire two per cent stake in Videocon International, has surprised marketmen who felt that the move is to prop up the share price indirectly by influencing public sentiment about the scrip.On Friday, on the Bombay Stock Exchange (BSE), the Videocon International share price touched an upper ceiling of Rs 70.85 with a huge buy order exceeding 11 lakh shares from operators. The share price which was ruling at around Rs 24 two months ago had been steadily going up. ``I expect the share prices to come near to the Rs 140 level shortly,'' said a BSE broker.Brokers are confused about the manner in which the share prices are allowed to move up in this fashion. ``This is for the first time that such a complex offer has been made for acquisition of a meagre two per cent stake by the promoters themselves. While investors will be interested in selling their shares under the open offer, it is not known what criteria the promoterswill use in buying two per cent from the offerers,'' said another broker, adding that not many investors will benefit from the move.``Will SEBI allow this kind of a share acquisition procedure?'' asks a NSE broker. If SEBI insists that the promoters should acquire more than 2 per cent share or all offers, the small investors will be benefitted. The offer to buy only 2 per cent is a clever strategy on the part of the promoters to jack up the sagging share price of the company for the next five-six years till their stake reaches 51 per cent.The takeover code of the SEBI is also silent about making an open offer for two per cent. As per the existing norms, companies will have to make an offer to buy a minimum of 20 per cent of the equity. At the same time, promoters are allowed to buy upto two per cent of the equity (creeping acquisition route), without triggering the takeover code.``When promoters have the option to buy two per cent directly from the market without making open offer, why they areshelling out nearly double the amount of the current market price of Rs 60?'' brokers ask. Apart from boosting the share price, the other idea seems to be aimed at scuttling any takeover attempt by pushing up the share prices and making any outside acquisition a costly affair.Venugopal Dhoot, chairman of the group, has vowed to make an open offer to buy two per cent stake every year till the promoters get 51 per cent stake in Videocon International. ``This means the share price of the company will remain at a high level for the next seven years,'' said a market operator.Explaining the strategy, he said, ``As there was no seller in the market on Friday (one day after the company announced the offer), the buy orders are likely to be cancelled. Even if the share price does go up in the next trading day, the scrip will again hit the upper ceiling level without any deal being stuck. The company's share price will move up by 25% every week.''According to market sources, promoters of each company is eager tosee his share price moving up at least on par with the price movements of rival companies. ``Sebi will have to ensure that companies should not manipulate share prices at the cost of investors,'' they said.The open offer has come at a time when financial institutions are getting ready to help Videocon raise a whopping Rs 1,526 crore in the next year. A major chunk of this amount will go in repayment of old loans. The main source of fund will be a proposed external commercial borrowing (ECB) of $ 200 million for which institutions will have to provide a guarantee. A huge amount of the Videocon group is blocked in bought-out deals (which had gone bust) and real estate investments (which depreciated).
