NFCL promoters to hike stake to 42 pc

However, market experts feel that the move by NFCL promoters to hike stake will also attract the takeover code. This means SEBI can ask NFCL promoters to make a simultaneous public offer to other shareholders. As a result of the preferential offer, promoters stake will be going up by over 10 per cent to nearly 42per cent.

Subsequent to the preferential issue, the equity of the company will increase from Rs 332 crore to Rs 458 crore. The move gains significance in the light of rumours that the company, the flagship of the Rs 1,400-crore Nagarjuna group, could be the likely target of a takeover bid. While these rumours and the identity of the potential raider could not be confirmed, market analysts say the equity hike lends credence to the market talk.

The scrip is now trading at Rs 29.50, which analysts say is a steal considering the company fundamentals and the completion of the expansion project.

The proposal for equity expansion is to come up at an extraordinary general meeting of the company slated for May 4. The company maintains that consequent to the equity increase, the management will have a wider resource base to implement its growth plans more effectively.

The company recently completed a Rs 970 crore expansion plan, which makes it one of the largest urea manufacturers in the country. In addition,the company is reported to have posted encouraging financials in the second half of 1997-98, pulling out of a lean period in the first six months, when it recorded a fall in net sales. The company’s output in the first six months was put at 3.55 lakh tonnes. It recorded a first-half profit of Rs 75.24 crore on sales of Rs 440.94 crore.

It may be recalled that Hyderabad-based promoters of Raasi Cements had to succumb to a hostile predator, India Cements. The company’s promoter, B V Raju had to sell the company to ICL after the latter bought more than 23 per cent from various break-away factions of the Raju family. Even the Rajus explored all options to scuttle the takeover attempt, they couldn’t succeed in averting the India Cements attempt.

The promoters of NFL fearing a similar threat, have decided to take a defensive move by hiking its own step. The company’s move will pave the way for all those promoters who presently have a very low stake in the company.

Another takeover proposal which has scaredpromoters is the move by Autoriders to take over Saurashtra Cement. The move by Saurashtra Cement promoters to hike stake through a preferential issue is being contested by Autoriders as the former had not made a public offer as per the takeover code. SEBI had, in fact, clarified that no exemption was given to Saurashtra Cement under the takeover code.

NFCL is a prime takeover target for a cash-rich business group. "There are several such companies in the cement, steel and chemical sectors. One advantage is that share prices of many companies have ruling at low levels for the last one year," said a broker.