MUMBAI, March 3: The financial institutions -- LIC, UTI and GIC -- have decided to sell their collective individual stakes in Indal to the party making the best price offer.The institutions together hold 36.6 per cent of Indal shares, but are waiting to see if Alcan, the Canadian parent of Indal, offers a price higher than the Rs 90 per share offered by Sterlite.
A senior institutional source said: "We have, in principle, accepted the idea of selling the stake in Indal. If Alcan can better the Sterlite offer, we may not hesitate to respond to that. We will sell the whole or a part of our stake in the company to either of them." A high-level meeting of institutional officials is proposed to be held after Alcan announces its counter offer to Sterlite's bid.
If Alcan decides to up the bid, it has to make an announcement before March 12 as per the Sebi takeover code.
However, differences have cropped up among the institutions over whether they should offload their stakes totally or only partially.
TheUnit Trust of India, for example, is basically an investor with a shorter-term profit horizon than the other institutions, LIC and GIC.
Its profit-booking imperatives are therefore different from those of the insurance companies.
In a similar situation, UTI had decided to offload its stake in Surat Electricity Company in favour of Torrent.
The decision on Indal, too, may not be the same for all financial institutions. "Each one has to decide how much to sell," the officials said. Price may not be the only consideration for the institutions to sell their stakes.
"We also want to ascertain from Alcan about its commitment to Indal's growth," he said. To persuade the institutions to support the present management, Indal assured it will take a fresh look. at its performance. from the investors' point of view. It will go in for a captive power plant. However, the FIs do not seem convinced about the present management performance so far.
INSIGHT
Way to go
A decision by the financialinstitutions to sell Indal shares will be path-breaking. It will set a precedent for the way they conduct themselves in similar situations in future.
If a decision on selling their stakes is made on commercial considerations alone, as the institutions now seem to be saying, this will have enormous implications for the Indian corporate sector. The largest shareholders in corporate India today are the institutions, and the fact that their shares are purchasable will give a tremendous push to M&A activity. The scare could also result in promoters trying their best to defend themselves by buying out the institutions' stake in their companies. For those institutions which have a public shareholding themselves, making the best of takeover offers is clearly an imperative. Their main objective should be to increase value for their shareholders. But even for wholly government-owned institutions, maximising returns on investments should be an important objective.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
