To increase stake beyond 50% to ward off hostile takeover bid.
Billionaire Anil Ambani is looking to increase his stake in Reliance Infrastructure (R-Infra) by about 5 per cent through the creeping acquisition route in a bid to increase the promoters’ holding above 50 per cent.
The promoters and promoter group companies, which are controlled by the junior Ambani, are expected to buy R-Infra shares in this financial year from the open market, where prices are reeling under global economic slowdown, said sources close to the company.
“The promoters want to control the majority stake in the company to ward off any hostile attack, when corporate rivalry heightens in the country. As the share price of R-Infra is cheaper around Rs 400, the promoters feel that the purchase of shares from the open market would be profitable, boosting the confidence of the shareholders in turn,” said sources.
At Wednesday’s share price of Rs 429.65, the promoters will have to spend about Rs 500 crore to buy 5 per cent stake. The scrip has fallen about 45.88 per cent in the last one month.
R-Infra, formerly known as Reliance Energy and prior to that BSES, is currently undertaking a Rs 2,000-crore buyback, which will help shareholders, including the promoters, to increase their stake. The promoters have so far increased their stake to 36.9 per cent through the buyback route, with an investment of Rs 630 crore.
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The company will have to spend another Rs 170 crore to complete the first round of buyback. It has already got the shareholders’ approval to invest Rs 1,200 crore for the second round.
As the stock price is volatile, it is not clear how much the promoters’ stake will be after the buyback. However, market sources said the promoters could raise their stake by 5-8 per cent through the remaining buyback option.
“But the promoters feel that the buyback option would tempt foreign institutional investors (FIIs) to tender their shares as the market condition is not attractive. Considering this situation, R-Infra is not active with its buyback plan now,” said sources.
Moreover, AAA Project Ventures, the promoter company, has 4.3 crore warrants with it. The board of directors on January 20 had allotted the warrants, which is convertible into equivalent number of equity shares, at a price of Rs 1,822.08. At the price offered for warrants, the promoters have to shell out Rs 7,800 crore at the time of conversion. As the share price is way below the warrant price, the promoter firm is not expected to convert warrants now to increase the stake. The promoter has time till July 2009 to covert warrants into equity.
According to the market regulator’s guidelines, the promoters could buy up to 5 per cent stake at existing market price in a year. Recently, the market regulator had allowed promoters to increase their holding in the companies through creeping acquisition route up to 75 per cent.