Gujarat-based entrepreneur Karsan Bhai Patel who took on the might of Unilever and Procter & Gamble in the Indian detergent and soaps market is all set to take the group flagship Nirma Ltd private.
The company has disclosed that an adequate number of shares have been tendered by the minority shareholders (at or below the discovered price) in the open offer by the promoters to allow their holding to go beyond 90%, the minimum threshold required for delisting a company from the stock exchange.
The ‘discovered’ price for the delisting through the book building process is Rs 260 per share that values the firm at Rs 4,137 crore or $900 million. Nirma scrip rose 1.12% to close at Rs 253.2 on Monday at BSE. Nirma had set a floor price of Rs 218 for each share in the delisting offer.
The promoters that held 77.17% in the company had offered to buy all the remaining shares to take the company private. The open offer closed on January 20. Shareholders who chose to bid higher than Rs 260 per share to tender their shares will have a window of one year to exit the company at the discovered price.
Although there is little information on the reason for delisting, there are various speculations. One theory is that the promoters may go in for separate listing of different businesses of the firm in the future. The company is already into diversified businesses suich as FMCG, pharma and chemicals. But it could have done the same thing through demergers rather than a circuitous route of delisting and then going for separate public issues.
Another plausible but purely hopothetical reason could be that promoters are looking to sell out but the potential acquirer doesn’t want to go through the process of dealing with delisting norms where invariably some punters try to extract more(and the process takes a long time without any guarantee that it will become a wholly owned subsidiary).
Some also view the decision to pressure from investor community as the company has not managed to generate better profitability down the years. For instance even as the consolidated net sales of the company more than doubled (partly thanks to acquisition of US soda ash maker Searles Valley Minerals) between FY’04 to FY’10 to make Nirma a $1 billion firm, its net profit remained flat at Rs 250 crore.
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