Frenzied buying interest was witnessed at the DSQ Software counter, the Chennai-based software company, following news that a foreign fund is picking up a 25 per cent stake in the company at around Rs 350-400 per share.
Yesterday, trading in the scrip was frozen at Rs 249.40 on the Bombay Stock Exchange and at Rs 256.40 on the National Stock Exchange, a gain of Rs 11.80 and Rs 19.20 over the previous close, respectively.
The names of Credit Suisse First Boston, Goldman Sachs and Ing Baring Private Equity Fund have been figuring among the list of prospective buyers. However no independent confirmation of the buyer was available.
According to market sources, Commonwealth Development Corporation (CDC), which currently holds a 19 per cent stake in the company, will be divesting in favour of the new player.
They added that remaining 6 per cent would be bought from the promoters.
Currently, DSQ promoters hold around 50 per cent of the total equity of the company.
DSQ officials did not respond to a questionnaire sent to them on Monday, despite repeated inquiries. Public holding in the company is around 10 per cent while domestic institutions hold 9 per cent. Total foreign holdings in the scrip, including CDC's stake, amounts to 30 per cent.
Though Dinesh Dalmia, managing director, DSQ, has been repeatedly denying any plans of equity dilution, top level market sources said that it makes sense for the promoters to partly dilute their stake without losing control of the company.
Even at a conservative price of Rs 350 per share, a six per cent dilution will bring in around Rs 42 crore.
The talk of a foreign player picking up stake in the company has been doing the rounds for a long time now.
Marketmen said that the deal was stuck mainly because of a dispute between the promoters of DSQ Software and CDC over the transfer of shares. DSQ Software obtained an injunction from the Chennai High Court restraining them from splitting the jumbo shares certificates of CDC which it had sent to the company for transfer.
Now with the matter having been resolved amicably between the two parties the deal is expected to be signed shortly.
For the year 1997-98, the company has posted a net profit of Rs 24.92 crore compared with Rs 15.14 crore for the previous year.
At an analyst meet a couple of months back, top management said that they were targeting a turnover of Rs 250 crore for the current year. This is nearly a 200 per cent jump over Rs 116.78 crore sales generated during 1997-98.
The company has also embarked on a major restructuring plan to strengthen its balance sheet. The company has already substantially brought down its equity investments in group companies. The company plans to reduce this figure to nil by the end of the year.
