Open offers in India Inc at decade-high

India Inc made 104 open offers in the last financial year that ended on March 31, the highest number of open offers over the last one decade ever since the Sebi came out with its takeover guidelines in 1997-98.

Collectively, these open offers were worth Rs 5,266 crore, 12 per cent up compared with the previous year. However, in terms of number, the open offers almost doubled last year from that of the previous year. In 2004-05, 58 open offers were made worth Rs 4707 crore.

"Typically, this is a sign of good times. The industry is consolidating through mergers and acquisitions and open offer is an ideal route for consolidation. Besides, cash-rich corporations are using liquidity to buy back shares. When you do not have any expansion plan, buying back shares is possibly the best way of rewarding shareholders as it shrinks the equity base and hence return on equity goes up," said the company secretary of a Mumbai based corporate house.

Nine open offers were made in April alone, with a total value of Rs 2,609 crore. Swiss cement major Holcim's open offer for Gujarat Ambuja Cement, which closed recently, is one of them.

Last year, Holcim had made an open offer for ACC shares. In terms of value, open offers made in 2005-06 were the second highest over the last one decade. In 2002-03, 82 open offers were made involving Rs 6,120 crore.

The open offers are generally made with the objective of change in control, consolidation of holdings and substantial acquisition of shares. Between April 1997 and March 2006, 642 open offers have been made involving over Rs 26,000 crore.

Analysts said the number of open offers would grow as more and more companies looking for consolidation.

"A few years back, when the stock markets were subdued, some of the promoters used the opportunity to hike their stake in companies. Now, the reason for an increasing number of open offers is entirely different. Promoters are increasing their holdings to cash in on the prospects of the firms," pointed out an analyst. Said Mihir Vora, head of equities, ABN AMRO, "This is a sign of high business confidence."

In the last financial year, Oracle made the biggest open offer of Rs 1375 crore to I-flex shareholders for 20.75 per cent stake in the company. The Anil Ambani group paid Rs 1,188 crore to acquire 25.28 per cent in Reliance Capital and MHM Holding, Germany, offered Rs 335 crore for 20 per cent stake in Mico Inks.