The share price of Hyderabad-based infrastructure company IVRCL has been on a crash course this week. The stock is down 15 per cent since Monday and closed at Rs 61.50 on Wednesday. The price had been falling after Sudhir Reddy, promoter of IVRCL, denied appointing any investment banker to sell promoter stake, now at 11.2 per cent in the company.
IVRCL shares had gained a little more than 20 per cent between March 27 and April 13, when Essel Group bought 12.27 per cent stake in the company. Essel’s entry in IVRCL gave rise to rumours of a management change as the Subhash Chandra-promoted group now holds more stake than the original promoters .
A few weeks earlier it was reported that Essel was approached by investment bankers stating IVRCL promoters might be interested in selling their stake. However, the asking price indicated by the promoters was much above the market price. This resulted in a rally in the stock.
Earlier this week, Essel said it was “disappointed" to know through an investment bank the promoters were now "neither interested in selling their stake nor willing to partner with Essel as strategic investors".
“Essel will keenly watch IVRCL’s management and performance. More specifically, it will critically evaluate the announcement made by the management in the media about its intent of selling some prime assets,” the Essel statement said.
However, market players still believe Essel Group may make a bid to acquire IVRCL and will not stay as an investor with a 12 per cent stake.
More From This Section
“By getting Essel to back off after acquiring a 12.3 per cent stake, Reddy has, for the moment, staved off what could have become a hostile takeover attempt for a company he founded more than two decades ago. But surely, Essel has not bought a stake in IVRCL for strategic investment. There is more to it and a partnership or takeover may happen next year, if not this,” said the head of institutional securities at a Mumbai-based broking firm.
IVRCL had said it was close to selling a few road projects to retire part of its debt of Rs 4,500 crore. Essel Infraprojects, a part of the Essel Group, became a joint venture partner of IVRCL in some projects, after its acquisition of a Maharashtra-based company.
Another reason for the fall in IVRCL stock was that it was put under ban in the futures and option segment, where traders are allowed to play only to offload positions. Stocks are put under a ban period if their derivative positions cross 90 per cent of their total market-wide positions.
During the same period, IVRCL Assets & Holdings, in which IVRCL owns 75.72 per cent stake, had risen 24.10 per cent.