After battling the government for eight months to try and forge a strategic alliance with Asian Paints, ICI Plc of the UK yesterday threw in the towel and sold half of its stake in Asian Paints to Unit Trust of India.
A block of about 1.8 million shares, which constitutes approximately 4.5 per cent of the 9.1 per cent which ICI Plc holds through Kotak Mahindra Capital Co was sold at Rs 280 per share to UTI.
The negotiated deal with UTI was done at Rs 15 below Tuesday's closing price. On Wednesday, Asian Paints strengthened to close at Rs 306.20 on the BSE and at 304.10 on the NSE.
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Reacting to the sale, Asian Paints vice-chairman Ashwin Dani expressed relief and said the company could now continue to focus on its business activities. He also indicated that he would be willing to buy the remaining 4.6 per cent shares from ICI.
The eight-month drama began when Atul Choksey sold his 9.1 per cent stake in Asian Paints to ICI via Kotak Mahindra in August last year at a price of Rs 351 per share.
The rest of ICI's 9.1 per cent stake is also reportedly up for sale. Market sources confirmed that negotiations are on with at four different large foreign funds.
ICI Plc announced from London that "following the Indian government's decision to close ICI's application for approval to buy 9.1 per cent of Asian Paints' shareholding, ICI is examining all options and will take appropriate action thereafter. Meanwhile, to enhance flexibility ICI required Kotak Mahindra Capital Co to return part of the advance given by ICI to KMCC in the context of ICI's agreement of August 1997 to purchase these shares subject to approvals. We understand from KMCC that today they have sold 4.5 per cent of the Asian Paints stake to UTI to raise the money to return the part advance to ICI".
"ICI may have held back part of the stake to try and realise a better price later," said brokerage sources in Mumbai. "Now with part of the stake in the hands of a long-term investor, the share price will probably firm up and ICI Plc will be able to realise a better price in the coming months," said a fund manager.
After picking up the shares at Rs 351, ICI's selling price of Rs 280 represents a loss of Rs 12.78 crore on half the stake. The loss is compounded by the devaluation of the rupee from 57 against the pound to Rs 66. This means that ICI has lost