Tatas exit from Goodlass Nerolac

MUMBAI, SEPT 30: In order to focus on its core businesses, the Tata group has sold off its entire shareholding in Goodlass Nerolac Paints...

MUMBAI, SEPT 30: In order to focus on its core businesses, the Tata group has sold off its entire shareholding in Goodlass Nerolac Paints Ltd GNPL to its foreign partner Kansai Paint Co Ltd of Japan for a consideration of Rs 98.56 crore. The 28.56 per cent shareholding of the main promoters 8211; Forbes Gokak and associates of the Tata group 8211; would be divested at a price of Rs 250 per share. However, the jump in share prices and volumes before the deal was announced on Thursday has raised doubts about insider trading in the scrip.

Reacting to the news, Goodlass scrip jumped to a new 52-week high of Rs 248 on the Bombay Stock Exchange today as compared to Rs 229.80 on Wednesday. While Sensex has more or less remained at the same level, Goodlass share price has gone up by 56 per cent from Rs 158 on September 15. The steady jump in share prices and volumes in the Goodlass share again reveal the inefficient mechanism to detect insider trading on time. In an unusual jump, Goodlass volume, which is in the B group, rose to 33,000 shares on Wednesday prior to the announcement. 8220;Trading volume in this share has always been below 1,000 shares,8221; said a broker.

On September 6, only 350 Goodlass shares were traded on the BSE. However, the number of shares traded zoomed to 52,600 on September 21, making a mockery of SEBI8217;s insider trading guidelines and transparency and fairness in corporate deals. The volume and prices went up over the last few days till the deal was announced on Thursday. 8220;Retail investors have been taken for a ride again,8221; said an investor.

Earlier, prior to Otis Elevator8217;s takeover by its American parent, the news was leaked to the market and the company8217;s scrip jumped in a sagging market. Sebi has then launched a probe into allegations of insider trading in the Otis scrip. 8220;Sebi should seriously take the insider trading cases as it is very weak in taking timely action,8221; said a BSE broker.

Meanwhile, Forbes said in order to maintain GNPL8217;s position in the paint industry, it would need to continue to grow and make large investments as is being done by its main competitors. It said the divestment would enable utilisation of the realised funds in a manner which would directly benefit FGL8217;s own shareholders.

The proposed transfer of Forbes8217; shareholding to Kansai is in accordance with the terms of the original shareholders8217; agreement under which either party is required to offer its shareholding to the other in the first instance. The transfer of shares is subject to relevant government and other approvals, the statement added.

The Forbes group, as the main promoter, has had the investment in GNP since 1976 and Kansai had bought out the shares of the earlier collaborator, Cooksons of the UK, in 1986. With this, Kansai8217;s equity stake in the paint firm would go up to 56 per cent. The Tatas, as per a recommendation made by its management consultant McKinsey and Co, have disinvested in many businesses to focus on automobiles, steel, hotels, software and electricity generation.

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Goodlass Nerolac is India8217;s second largest paints company after Asian paints and a clear leader in the industrial paints segment. Kansai figures in the top ten paints companies internationally. As it is one of the co-promoters, Kansai will not have to make an open offer to minority shareholders of Goodlass Nerolac. The Tatas8217; stake was held through Forbes Gokak and its associate companies.