Taking over and shaking hands

ICL has two sets of promoters, N Srinivasan and his brother and the Sanmar Group run by brothers N Sankar and N Kumar who is also the head of CII. In the 1980s, the two sets of promoters were involved in a legal battle over the control of the company. The financial institutionshad then stepped in to run the company. In 1989, the promoters patched up and allowed the team led by the current managing director Srinivasan to run the company. Since then the company has not looked back.

Ripples of fear

The immediate fallout of the takeover of Raasi has been the rush for other promoters to increase their holdings in the companies they run. The Dhoot family, which is the promoter of Videocon International Ltd, announced an open offer to buy two per cent in the consumer electronics firm. The fear of takeover seems to have prompted this surprise decision by the Dhoots.

It made an offer at a price of Rs 140 per share which is more than twice the current market price of Videocon International’s shares. The Dhoots currently own 35 per cent of the company while their associates hold another seven per cent. The Dhoots are being advised by the international merchant banker, Jardine Fleming for the acquisition and the offer will open as soon as Securities and Exchange Board of Indiagives its green signal to the offer document.

The Dhoots plan to make further acquisitions of two per cent each year until they have a controlling 51 per cent stake. While the Dhoots have officially denied that the fear of takeover is the reason behind the acquisitions, the market does not seem to agree. Especially since the promoters say that the current market price does not reflect the intrinsic value of the company.

The two per cent offer is being made to reach small shareholders who will be preferred to the large ones. Also a mere two per cent offer will not trigger the Securities and Exchange Board of India’s takeover code. Therefore, the Dhoots will not have to make an offer for 20 per cent stake. The total acquisition will cost around Rs 19.6 crore. Which is a small price to keep the company within the family. But the open offer by Dhoots is being seen in the market as an attempt to prop up the price of the company’s shares. On Friday, in the Bombay Stock Exchange (BSE), the Videocon Internationalshare 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.