It’s raining delisting offers on Dalal Street!

With SEBI mandating that all listed companies have to increase public shareholding to a minimum 25% by June 2013, companies have to take a call sooner or later whether to reduce promoter holding or go for delisting mechanism, SMC Global head of research Jagannadham Thunuguntla said

New Delhi: The stock market is witnessing a slew of delisting offers, including those of UTV Software and Patni Computer—a trend being attributed by experts to an opportunity for the promoters to buy out the minority public shareholders at low valuations prevailing currently, reports PTI.

Media and entertainment firm UTV Software Communications and Carol Info Service, which provides contract manufacturing service for nutraceutical and milk-based products, have already begun the process of their voluntary delisting plans.

In addition, Japanese auto component maker Exedy Corp would float delisting offer for its BSE-listed unit Exedy India between 24th January and 31st January.

Sweden-based Alfa Laval Corporate AB has also announced plans to delist its unit, Alfa Laval India, from domestic bourses by offering Rs2,850 a share to public shareholders.

US-listed software firm iGate in November said it would delist shares of its unit, Patni Computer Systems, at floor price of Rs356.74 a piece to public shareholders.

Several other multinational companies (MNCs) may also come out with delisting offers for their Indian units in the next few months.

According to brokerage firm ICICI Direct, Oracle Financial Services, Novartis, Honeywell Auto, Thomas Cook, Singer, Gillette, AstraZeneca Pharma, Blue Dart, 3M India among others, as probable candidates.

“Many companies are coming out with delisting offers in order to comply with the Securities and Exchange Board of India’s (SEBI) guidelines,” SMC Global head of research Jagannadham Thunuguntla said.

With SEBI mandating that all listed companies have to increase public shareholding to a minimum 25% by June 2013, these companies have to take a call sooner or later whether to reduce promoter holding or go for delisting mechanism, he added.

The corporates, particularly fundamentally strong MNCs, may not have the inclination to increase their public holding and therefore could resort to delisting to have better flexibility in taking business decisions.

“The case for delisting becomes stronger in the current weak trend prevailing in the equity markets, which has led to a substantial fall in stock prices providing an opportunity for such corporates to buy out the remaining stake with the public at lower valuations,” Pankaj Pandey, head of research at ICICI Direct said.

“The chances of a delisting offer succeeding also appears higher due to a moderation in return expected by the public shareholders and the enhanced willingness to exit the stock even at a marginal premium to current stock prices,” he added.

Walt Disney's delisting offer of Rs835.03-Rs1,000 a share for UTV Software shares opened on 16th January and close on 20th January. The Khorakiwala Group would also launch a delisting offer for shares of group firm Carol Info Services during the same period.

 

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COMMENTS

Nagesh Kini FCA

5 years ago

This whole business needs to be debated. It is patently anti-small investor, inasmuch as, the promoters after getting their issues subscribed are now trying to buy out at a much lower price. The SEBI and Stock Exchanges need to examine the pricing in its entirety, more particularly on buy backs of RIL.The entire matter appears fishy.

RCom plans $1.5 billion IPO of undersea cable unit Flag

The company is planning an initial public offering (IPO) of its undersea cable assets Flag Telecom, seeking a valuation of $2 billion. Under the offer, Flag Telecom will be listed as a business trust and Deutsche Bank is working on the deal

New Delhi: Anil Ambani-led Reliance Communications is looking at raising up to $1.5 billion (over Rs7,560 crore) through listing of its undersea cable unit Flag Telecom in Singapore, reports PTI.

According to sources, the company is planning an initial public offering (IPO) of its undersea cable assets Flag Telecom, seeking a valuation of $2 billion.

Under the offer, Flag Telecom will be listed as a business trust and Deutsche Bank is working on the deal, they added.

The deal may see selling of 75% stake in Flag Telecom.

When contacted, a company spokesman said, “Reliance Communications (RCom) continually works on various options to unlock value from its unique combination of global telecom assets, for the benefit of its shareholders.” 

RCom had acquired Flag Telecom, the undersea cable business, in 2003 for about $207 million.

RCom has been exploring various routes of raising funds, including selling stake in its telecom tower arm, Reliance Infratel.

Last year, a deal to sell stake to tower major GTL Infrastructure for $11 billion ( Rs50,000 crore) fell apart.

As of quarter ended September 2011, the company has a debt amounting to nearly Rs32,000 crore.

On Tuesday, RCom had announced that three leading Chinese banks have agreed to refinance its outstanding foreign loans worth Rs6,125 crore. This is the biggest ever overseas loan refinancing arrangement by any Indian company.

The refinancing for RCom’s outstanding FCCBs (Foreign Currency Convertible Bonds) worth $1,182 million (Rs6,125 crore) would be provided by Industrial and Commercial Bank of China (ICBC), China Development Bank (CDB) and Export Import Bank of China (Exim), among others.

RCom is the flagship company of Anil Ambani-led Reliance Group. The group has a networth in excess of Rs89,000 crore ($19.7 billion), cash flows of Rs10,900 crore ($2.8 billion), net profit of Rs3,600 crore ($0.8 billion).

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Telecom Commission for price discovery of spectrum through auction

The Telecom Commission has recommended that all spectrum allotments beyond 4.4/2.5-Mhz will be charged at market price, both from existing as well as new allottees, and the price for spectrum in the 800/900-MhZ band will be 1.5 times the price of spectrum in the 1800-Mhz band

New Delhi: The Telecom Commission has recommended that discovery of spectrum prices should only be through an auction in future, both for 4.4 MHz of start-up airwaves or additional bandwidth beyond this required by telecom operators from time-to-time, reports PTI.

The Telecom Commission has submitted its recommendations to telecom minister Kapil Sibal, who will take a final decision in this regard and also seek a Cabinet nod for the proposal.

According to sources, the Telecom Commission has recommended that all spectrum allotments beyond 4.4/2.5-Mhz will be charged at market price, both from existing as well as new allottees, and the price for spectrum in the 800/900-MhZ band will be 1.5 times the price of spectrum in the 1800-Mhz band.

In December last year, the Telecom Commission had taken a decision on the Telecom Regulatory Authority of India’s (TRAI) recommendations with respect to spectrum auction, pricing and merger and acquisition-related issues.

Besides spectrum pricing, the commission has recommended a uniform licence fee of 8% of adjusted gross revenue (AGR).

The telecom industry was demanding a lower licence fee of 6 per cent of AGR, while sectoral regulator TRAI had recommended a fee of 8% of AGR in a phased manner over a period of two years.

New guidelines will be put in place with respect to mergers and acquisitions. The merger of entities with a market share of up to 35% (based on subscribers and/or AGR) in wireline and wireless services should be permitted, the commission has recommended to Mr Sibal.

However, appropriate guidelines shall be framed for cases where the merged entities would have a market share of more than 35%, in consultation with TRAI and the concerned authorities, the source said.

Post-merger, an entity will not to be allowed to hold more than 25% of the spectrum in a service area.

TRAI had recommended that if an entity, post a merger or acquisition, has up to 35% market share, it would be considered in the ‘green line’ or safe harbour.

However, in cases where the market share is above 35% but less than 60%, the proposal was to be referred to TRAI, as per the sectoral regulator’s recommendations. Subsequently, TRAI will carry out a detailed examination to ensure that there is no abuse of market dominance, it added.

Spectrum sharing will be permitted in order to promote efficient utilisation of spectrum and TRAI will be entrusted with the task of carrying out a review of usage of spectrum and make recommendations in this regard.

In addition, the Telecom Commission has recommended that spectrum in the 800-MhZ and 900-MhZ bands will be refarmed at the time of renewal. TRAI will make detailed recommendations in this regard, the Telecom Commission has told Mr Sibal.

Furthermore, a study will be conducted regarding the need for additional spectrum to supplement rural coverage provided by telecom service providers on a purely commercial basis.

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