Philips now targets 100% stake in India arm

MUMBAI, NOV 30: In a curious development, Philips India's Dutch parent Royal Philips Electronics NV has decided to increase its stake in i...

MUMBAI, NOV 30: In a curious development, Philips India’s Dutch parent Royal Philips Electronics NV has decided to increase its stake in its India arm to 100 per cent from the present 51 per cent.

The Dutch firm said that it has revised its open offer for the shareholders of the company by planning to accept in full, the shares tendered in the open offer. With this, the stake of Royal Philips will go up to 100 per cent from the present 51 per cent. If the company acquires more than 90 per cent, it has the option to delist its shares from all the stock exchanges. Moreover, it will also enable the company to repatriate more profits from the country.

Despite a boom in the consumer goods industry which saw upstarts like BPL and Videocon making huge profits, the Indian arm of Philips has been recording disastrous financial performances in the last few years. As a result, its share price was languishing at new lows.

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As per its news statement, the open offer now stands revised from 1,04,72,671 fully paid up equity shares which constitutes 23 pre cent of the total paid up capital of PIL to 2,23,11,341 fully paid up equity shares, which constitutes the entire balance outstanding equity capital of the Indian firm.

The open offer will close on December 12 this year. The offer price at Rs 105 per share offers a premium of 55.5 per cent over the SEBI-mandated price, it adds. Philips India scrip closed at Rs 97 on the BSE on Thursday.

Analysts feel that the offer for the additional stake in Philips India will cost the parent company around Rs 115 crore. While announcing the intention to purchase the entire 49 per cent with the public and institutions, a tersely worded release from the company did not reveal the reasons for the buyout of the 100 per cent stake. “One reason could be the government move to remove restrictions on dividend repatriation. It makes sense for MNCs to make their Indian arms fully owned subsidiaries,” said an analyst.

However, the company said that the response to “the open offer has been positive and the increase in size will give an opportunity to all the shareholders including the financial institutions to benefit from the attractive exit option given to them.” It further said “this (revised offer) will enable participation of all minority shareholders of Philips India in the open offer. This revision will now allow Philips to accept in full, the shares tendered in the open offer.”

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When Philips announced the open offer two months ago, it justified the move saying it was to enable the parent company to have better commitment in terms of resources, technology and new products. However, analysts expressed surprise over the company’s decision to buy out the entire holding from shareholders on Thursday.

Analysts point out that Philips has been beset with problems for the last few years with its share in the consumer durables market declining. Philips has been focusing on restructuring to achieve results. But analysts point out that the problem lies in not being able to respond to the market situations. The 14-inch and 20-inch sets account for 55 per cent of the total colour television market. But despite being one of the first companies to enter the CTV market, it has only recently entered these segments.

Philips registered a loss of Rs 4.05 crore for the third quarter endedOctober 1, 2000 as against a net profit of Rs 4.12 crore for the same period last year.