Tuesday, April 17, 2012

IVRCL Stake Doubled by Merrill Lynch, Even as Essel Rules Out Open Offer

E Sudhir Reddy,
Chairman & MD, IVRCL Ltd

By Special Correspondent:

The so-called battle for control of IVRCL Ltd (BSE: 530773, NSE: IVRCLINFRA) between promoter E Sudhir Reddy and Subhash Chandra led Essel Group, turned more mysterious on Monday, 16th April 2012, with three key developments.

Essel Group announced through multiple media presentations on Monday that it won’t be coming out with an Open Offer in IVRCL or buying more shares in the infrastructure major, signaling that it won’t be pursuing a hostile takeover bid.

StockExplain had recently expressed its doubt about the authenticity of this supposed hostile takeover bid, citing the close business connections between the two groups.

Essel on Monday revealed more details on this front, when it divulged that IVRCL’s investment bankers had approached it a few months back with an offer to sell the promoter’s stake, but that it didn’t agree due to the high price.

But this development was not enough deterrence for Merrill Lynch Capital Markets Espana SA SVB, which went ahead and bought 21.25 lakh shares at Rs. 70.83 a share, on Monday, as revealed by data published by NSE after trading hours.

StockExplain had reported on Friday that this noted FII had bought 16 lakh shares or 0.60% stake at Rs. 73.97 a share, in a deal valued at Rs. 11.84 crore. 

Monday’s purchase amounted to another 0.80% stake, and is worth Rs. 15.05 crore. With this, the FII has more than doubled its stake, by pumping in close to Rs. 26.89 crore for a 1.40% stake in IVRCL, through identified buys alone.

As was the case on Friday, there were no identifiable institutional sellers as counterparties to the massive buy.

But there were enough sellers in the market, accelerated also by the no-open-offer announcement by Essel. IVRCL lost further ground and closed 2.68% down in NSE, at Rs. 70.85 a share.

Interestingly, in a third development on Monday, the infra major’s largest non-promoter shareholder, Norges Bank of Norway disclosed in Bombay Stock Exchange that it had sold off another 0.09% stake in IVRCL on 12th April. StockExplain had earlier reported that Norges Bank had sold off 0.60% stake on February 16th.

But what is more interesting in the Norwegian Central Bank’s disclosure is that it holds only 4.38% stake as of now. Just 3 to 4 months back, its arm, The Government Pension Fund Global, was holding 9.47% stake in IVRCL.

Norges Bank has clearly utilized the rally caused due to Essel buying and the ensuing Open Offer buzz to continually sell in the market, more than half of its holdings, at a high price.

Much of the Norwegian sells were probably absorbed by  Essel itself, and they have replaced the Scandinavian entity as IVRCL’s largest non-promoter shareholder. Essel’s current position is that it will remain only as a strategic investor in the company, and won’t pursue promoter ambitions, as the current promoters are not willing to sell.

But whether this is another strategy, only further price action and institutional activity will reveal.

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