Kotak Mahindra had, on behalf of ICI, bought 9.1 per cent of Asian Paints promoter and managing director Atul Choksey in 1997 at Rs 347.5 per share. However, this entry was unacceptable to the remaining promoters of Asian Paints, who declined to transfer the shares. In view of the stalemate, Kotak Mahindra had last year sold around 4.6 per cent of the equity in Asian Paints to Unit Trust of India at Rs 280 per share.

Friday's Rs 74.4 crore deal marks the end of the controversy which one stage threatened into erupt into a major takeover battle. However, with the Foreign Investment Promotion Board refusing to allow the ICI investment without the concurrence of the promoters, the move was stillborn.

With the purchase of an additional 4.5 per cent, the stake of the three promoters has increased to around 45 per cent, although it is not known whether the shares have been bought equally by the three promoters or not. "It is not material how the shares are distributed amongst the promoters. We now have an agreement in place which ensures that if any promoter decides to sell his holding has to be be first offered to the existing promoters," said Asian Paints vice chairman and managing director Ashwin Dani.

"Today's development proves that Asian Paints is a good investment at any time, at any price, irrespective of what the market thinks," Dani added. The stockmarkets greeted the announcement positively and the Asian Paints scrip hit the circuit-breaker to close at Rs 414 as against yesterday's close of Rs 384.

Said Kotak Mahindra managing director Uday Kotak: "The way the market has reacted is a positive reflection on Asian Paints." Kotak declined to comment on whether his company made any losses on the transaction, and whether these would be reimbursed by the UK-based company. "At the end of the day, a deal is what is important," he said. Dani said: "Even without this deal, the promoters were quite comfortable with the equity stake. We are happy that Kotak Mahindra agreed to sell the shares to us, which has further strengthened the promoters' holding." He ruled out the possibility of any equity tieups for Asian Paints at a later stage. "Asian Paints will remain an independent and financially-strong Indian company," he said.