Stock surge: SWC may move Sebi

Market operators had got an inkling of the open offer before it was announced.

Shaw Wallace & Co seems to be considering drawing the attention of the Securities and Exchange Board of India to the unusual spurt in the scrip's price as well as the volume during the last one-and-a-half months.

This follows the Vijay Mallya-owned UB group's open offer yesterday to Shaw Wallace shareholders for 25 per cent of the company's equity at Rs 250 a share.

Sources close to the development said the rise in the share price and in the trading volume suggested market operators had got an inkling of the open offer before it was announced yesterday.

When contacted, a senior Mumbai-based Shaw Wallace executive declined to comment on the matter. A Shaw Wallace spokesperson, too, refused to comment.

The Shaw Wallace share price went up by 48 per cent, from Rs 156.05 on January 1 to Rs 231.05 yesterday on the Bombay Stock Exchange. The stock reached its all-time high of Rs 242 yesterday, a few hours before Mallya announced the open offer in a teleconference from New York.

Today, the Shaw Wallace stock closed at Rs 225, which is 2.51 per cent lower than yesterday's close. The traded volume jumped from 24,266 shares on January 1 to 876,000 shares yesterday.

Two block deals on the Shaw Wallace counter were done today, though the details were not known immediately.

Informed sources said there was apparently no reason for the Shaw Wallace share to go up. "Shaw Wallace had put its distillery business on the block. Later, the promoters went back on that decision. There is no justification for the share price to have gone up. It shows a handful of stock brokers knew in advance there would be a big-ticket announcement about Shaw Wallace," they added.

A UB group spokeswoman said neither Mallya nor the group had purchased Shaw Wallace shares from the open market. "Why should we buy shares from the open market when the group is introducing a 25 per cent bid? The group will buy through the open offer," she added.

Meanwhile, the financial institutions and mutual funds, led by the Unit Trust of India (UTI) and Life Insurance Corporation of India (LIC), are keeping a close watch on the unfolding Shaw Wallace drama. UTI holds a 7.84 per cent stake in Shaw Wallace and LIC around 4 per cent.

Collectively, the financial institutions hold close to 22 per cent of the company's equity and they will have a major effect on the success of the hostile takeover bid mounted by Mallya.

The LIC investment committee will meet by the weekend to take stock of the situation. Market sources said Shaw Wallace was in touch with the institutions and may try to persuade them not to respond to the open offer. However, this could not be confirmed.