Is Essel Group using backdoor to increase stake in IVRCL? After Essel Group buying nearly 12.3% of stake in IVRCL Ltd, JM Financial, the group advising Essel in its investment plans with the Hyderabad-based infrastructure company, has also increased its stake beyond 5%.
Although the Essel Group earlier said it had plans of upping its stake in the infrastructure company, it has now been telling the media that it is in the wait-and-watch mode. Indian Express had, in fact, reported that Essel was not looking at buying more shares in IVRCL after having acquired 12.27% in the target firm. A few weeks earlier, Business Standard had noted that Essel's stake was very close to that held by IVRCL's promoters and had hinted at the possibility of a hostile takeover.
Whether the company will directly increase its stake to 25%, the Securities and Exchange Board of India's mandate for an open-offer according to the takeover norms, or not; it sure seems that the two companies might just join hands and together touch the 25% mark for a takeover of the infrastructure company.
Currently, the Subhash Chandra-promoted Essel Group owns 12.27% stake in the company while JM Financial, the advisor holds 5.04% stake, taking the sum to 17.31%.
Foreign Institution Investor's and domestic institutional investors hold 37.11 and 5.4% stake in the company respectively as per the shareholding pattern on December 21, 2011, the rest was public.
Essel's is higher compared to a mere 11.2% held by the promoter S. Reddy and his associates. Reddy is trying all the tricks in his book to increase his stake. It now plans to merge a subsidiary called IVRCL Assets & Holdings which is likely to increase his stake to 13.8% post merger. The promoter was earlier planning to raise funds through his joint venture partners to increase his stake, but that does not seem to have materialised.
What is imminent is that Essel Group is already at an advantage as its holding in the company is higher than that of the promotors.
Earlier this month, Essel had offered to buy out IVRCL's promoters after rumours that Sudhir Reddy wanted to exit the firm.
At the moment, Reddy has banished all claims of exiting the company. Even as he tries to resist a hostile takeover from the interested firms, he is, on the sidelines, looking to sell six projects to reduce his debt burden.
While, FII's have been gradually decreasing their stake in the company looking at the latter's performance during the past year, IVRCL shares went up by more than 17% since March 28 after the Essel Group made the announcement on stake acquisition.
| Date | Buyers | Traded Volume | Average price |
| 4/16/2012 | MERRILL LYNCH CAPITAL MARKETS ESPANA S.A. SVB | 2125000 | 70.83 |
| 4/13/2012 | MERRILL LYNCH CAPITAL MARKETS ESPANA S.A. SVB | 1600000 | 73.97 |
| 4/12/2012 | AMRAPALI INDUSTRIES LTD. | 1880000 | 72.27 |
| 4/3/2012 | JAY PROPERTIES PVT LTD | 3390513 | 69.41 |
| 3/27/2012 | ASIAN SATELLITE BRODCAST PVT LTD | 8340563 | 60.47 |
| 3/27/2012 | ASIAN SATELLITE BRODCAST PVT LTD | 4738437 | 60.41 |
| 3/26/2012 | JAY PROPERTIES PVT LTD | 2900000 | 59.46 |
| 3/22/2012 | ASIAN SATELLITE BRODCAST PVT LTD | 1580000 | 59.32 |
| 3/22/2012 | JAY PROPERTIES PVT LTD | 2200000 | 57.67 |
| 3/22/2012 | PIXEL MERCANTILES P LTD | 1900000 | 57.28 |
| 3/21/2012 | ASIAN SATELLITE BRODCAST PVT LTD | 2690000 | 55.23 |
| 2/24/2012 | MACQUARIE BANK LIMITED | 1448000 | 53.34 |
| 2/22/2012 | SAVI PORTFOLIO MANAGEMENT SERVICE P LIMITED | 1500000 | 58.68 |
| 12/13/2011 | MACQUARIE BANK LIMITED | 4000000 | 33.5 |
| 11/21/2011 | PUNEET VINCOM PRIVATE LIMITED | 1653889 | 32.67 |
| 8/3/2011 | BARCLAYS CAPITAL MAURITIUS LIMITED | 1405806 | 54.47 |
| Date | Sellers | Traded Volume | Average price |
| 4/11/2012 | PENGUIN DEALTRADE PRIVATE LIMITED | 1475054 | 71.32 |
| 3/29/2012 | HSBC GLOBAL INVESTMENT FUNDS MAURITIUS LIMITED | 2627635 | 64.41 |
| 2/16/2012 | NORGES BANK A/C NORGES BANK ON ACCOUNT OF THE GOVERNMENT P | 1597034 | 59.28 |
| 2/8/2012 | ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED | 1915721 | 55.75 |
| 12/13/2011 | PRISM COMMODEAL PVT LTD | 1633249 | 33.48 |
Fundamentally, there is little in the company that can justify the strong move. It is only on hopes of a takeover battle and a possibility of a new deep pocket promoter at the driver's seat that is shooting the stock up.
Data released by the stock exchange shows that some FIIs have again started buying in the company to take advantage of the situation.
