Mumbai, Mar 1: Karsanbhai Patel of Nirma Ltd is understood to be on the prowl for a takeover. Among other things, the detergents major is said to be considering making an open offer to acquire a substantial stake in Gujarat Heavy Chemicals Ltd (GHCL), a company owned by Sanjay Dalmia.After having succeeded in getting a 4 per cent acquisition of GHCL shares transferred in its name, Nirma is mulling further steps, according to market sources. While Nirma officials obviously deny any move or intention to acquire GHCL, sources said the Calcutta-based C Mackertich & Co has been appointed as lead manager for a possible open offer to be made some time this month.
Nirma Ltd had acquired close to 4 per cent in GHCL through open-market transactions around the middle of 1997. The last lot of shares purchased (about 11 lakh shares) was transferred to Nirma only a month back. Sources said GHCL had earlier declined to transfer these shares in Nirma's name on the grounds that it was an attempted takeover.
"The shareshave now been transferred in our name," confirmed a Nirma source. In all, Nirma has purchased 30 lakh GHCL shares.
Nirma had earlier stated that the purchase of GHCL shares was solely for the purpose of investment and constituted less than 5 per cent of GHCL's equity.
Meanwhile, the GHCL stock has recorded a sharp jump in volumes by over 260 per cent to touch a high of 19,800 shares on February 27.
The stock price on the Bombay Stock Exchange also firmed up by 3.8 per cent to close at Rs 16.35 over Thursday's close of Rs 15.75. However, the Nirma stock has been recording a steady fall from a high of Rs 368 recorded on February 19 to a stagnant price of Rs 360 on Febuary 27.
Industry observers say that Karsanbhai Patel's interest in GHCL is an indication of his efforts to garner a substantial market share in soda ash. Earlier, the company had reportedly approached Gujarat Industrial Investment Corporation (GIIC) for buying out its 15.65 per cent stake in GHCL's Rs 93- crore equity capital. However,since the GHCL management has the first right of refusal, GIIC approached the Dalmias to sell off its stake in the company. Though Sanjay Dalmia has offered to pick up the GIIC stake based on a pre-determined formula, the deal it appears has not yet been finalised.
However, the question is whether the second largest shareholder in GHCL, Industrial Development Bank of India (IDBI), will sell off its stake to Nirma in case an open offer is made. IDBI has a substantial 19.9 per cent stake in GHCL. The leading financial institution had earlier indicated an intention to back the existing management of the Dalmias and refrain from offloading its shares.
In such a situation, Nirma's open offer will fetch a stake of around 30 per cent in the company, assuming most of the minority shareholders sell.
If Nirma succeeds in gaining control of GHCL, its total soda-ash capacity will increase to over eight lakh tonnes, which is the same as that of market leader Tata Chemicals, analysts said.
GHCL posted a turnoverof Rs 355 crore in 1996-97 and a net profit of Rs 50 crore.
INSIGHT
Acquisition makes sense
One of the objectives of Nirma's rights issue was to part-finance soda-ash capacity, which is its raw material. The acquisition obviously makes sense for Nirma as its material costs will be lower to the extent of margins enjoyed by its creditors. The reason cited by Gujarat Industrial Investment Corporation on the first right of refusal does not hold water going by a precedent set by a Supreme Court judgement.
Though the judgement was delivered in case of a private company, it was successfully cited by a leading Hong Kong-based FII, which used it to its advantage in the Gujarat Gas shares deal.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
