The instances of multinationals (MNCs) acquiring the entire equity of their Indian subsidiaries through open offers and then delisting from the stock exchanges has doubled from eight in 2000 to 16 in 2001. In 1999, there were only 6 such offers. According Prime Database estimation, 90 more such cases are estimated to be in the pipeline.
Prime Database said, "Buying out the domestic shareholding is coming quite cheap given the prolonged depressed secondary market which makes acquiring shares based upon market prices very attractive."
Among the major companies having exercised the options are -- Cadbury (Rs 875 crore) Philips (Rs 234 crore), Carrier Aircon (Rs 115 crore), Otis (Rs 109 crore), Industrial Oxygen (Rs 104 crore), ITW Signode (Rs 90 crore), Wartsila (Rs 71 crore), Rossel (Rs 61 crore), Sandvik (Rs 42 crore) and Infar (Rs 41 crore).
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Prithvi Haldea, managing director, Prime Database, said that a company normally seeks listing for raising capital, while none of these MNCs need Indian capital. According to him, the MNCs were forced to list under the FERA Act. He also added that most MNCs prefer to list shares of only their main arm. Multiple listings in multiple countries are not only cumbersome but can also be a nightmare in view of different listing, disclosure and compliance requirements.
Haldea also feels that through total control of the subsidiary, the foreign parent is more comfortable with putting more proprietary technology or more brands or more research and development expenses into their Indian operations. He also mentioned that the complex, multiple and overlapping regulations in the country serve as dampener for most MNCs. He even views that many MNCs feel that their low share prices despite company's good financial performance can have a negative rub off on their brands. Many MNCs are also concerned that India's scam-ridden market may unnecessarily implicate them or their company management at some point of time.
Haldea also said that the historical low prices of shares over the last six months makes buying back very attractive now.