Saturday, March 24, 2012

Inox Leisure Ups Stake in Fame India to 69.60% by Further Buying for Rs. 4.98 Crore

Deepak Asher,
Director, Inox Leisure and
Director, Fame India.
By Special Correspondent:

Fame India Ltd (BSE: 532631, NSE: FAME) counter on Friday witnessed continued buying by its promoter, Inox Leisure Ltd (BSE: 532706, NSE: INOXLEISUR) and its Group, for the second day. Inox picked up 4.15 lakh shares or 0.50% of Fame at Rs. 72.90 a share in NSE, making Friday’s buy worth Rs. 3.02 crore.

On Thursday, Inox Leisure’s promoter, Gujarat Flurochemicals Ltd (BSE: 500173, NSE: GUJFLUORO) had picked up 2.77 lakh shares of Fame India at Rs. 70.75 a share, in BSE. Thursday’s buy amounted to 0.75% of Fame and was worth Rs. 1.96 crore.

With these buys on consecutive days, Inox Leisure Group’s stake in Fame India stands enhanced to 69.60%. The Group, which already controls Fame as its promoter entity as well as majority shareholder, has pumped in close to Rs. 5 crore during the last two days.

This strategic move follows a recent Rghts Issue in Fame India, through which Inox Leisure upped its stake in Fame from 50.21% to 68.35%. Though this development which happened on 2nd March was disclosed to Exchanges on 7th March itself by Fame India to comply with SEBI (SAST) regulations, on Friday this was again disclosed by Inox Leisure at BSE to comply with SEBI (Prohibition of Insider Trading) regulations. 

This crucial Rights Issue itself followed a protracted takeover battle with Reliance Mediaworks Ltd (BSE: 532399, NSE: RELMEDIA) for controlling Fame India, which Inox had convincingly won despite a competing Open Offer from the Reliance ADA Group firm.

The fact that Reliance ADAG was a formidable shareholder in Fame India with 35.36% stake, even after the takeover battle was officially won, was discomforting to Inox. Fortunately for it, Reliance ADAG didn’t subscribe to Fame India’s Rights Issue, while Inox went ahead and cornered 99.61% of the Issue, by investing Rs. 88.93 crore, at Rs. 44 a share.

All these three companies - Fame, Inox, & Reliance Mediaworks - are leading listed players in the movie exhibition and multiplex business in India. The fight for Fame India between Inox and Reliance ADAG was basically to further their leadership in the total number of movie screens each of them controls across the country.

If Reliance ADAG has not made any market purchases or sells after Q3 end, its stake in Fame India stands reduced at 22.38% post the Rights Issue, thereby denying it some privileges in controlling the company, like veto power, that it was earlier entitled to.

While the way in which the Rights Issue happened had given rise to speculation that the rival groups Inox and Reliance ADAG had reached some kind of tacit understanding, the last two days’ market buying by Inox indicates that this may not be the case.

It is now clear that Inox Leisure is not taking any chances even at this point of time, considering the relatively large size and market influence of Reliance ADAG, promoted by billionaire businessman Anil Ambani.

What Inox has done on Thursday and Friday is buy out some individual shareholders holding significant stakes in Fame India, thereby preventing these shares from falling into Reliance ADAG’s hands, which if happens will again give Reliance a 25% stake and some controlling privileges in Fame India.

On Friday, an individual investor of Fame India has offloaded his entire stake (as of Q3 end) of 3.80 lakh shares in National Stock Exchange. And on Thursday, another individual investor had offloaded over 3 lakh shares in Bombay Stock Exchange.

Friday’s buy has further strengthened Inox Leisure’s position in the industry, and the market appreciated the move, as seen from the 9.65% gain in the stock. The gain in Fame India was relatively negligible, as there is still the overhang from the significant holding by Reliance ADAG, and what they would do with it now.

Also limiting Fame India’s gain was its steep run-up during the past three weeks, gaining by over 65%. 

Interestingly, Inox Leisure stock also has this overhang as during its long-drawn battle to control Fame India, its opponent and the flagship company of Reliance ADAG, Reliance Capital Ltd (BSE: 500111, NSE: RELCAPITAL), had bought into Inox Leisure also, and is its largest non-promoter shareholder with a 3.88% stake.

Other large investors in Fame India include Indiaman Fund (Mauritius), Money Matters Advisory Services, and Religare Finvest, with each holding 1-1.5% stake. It will be interesting to watch the calls being taken by these investors in the coming days.

Anyway, with almost 70% of Fame India in its kitty now, there is a high chance that Inox Leisure would eventually pursue a merger of Fame with itself.

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