The acquisition of the controlling stake of 14.9 per cent in Great Offshore by Bharati Shipyard (through its subsidiaries) by way of purchase of pledged shares in a non-cash deal technically “averted” compliance of a mandatory requirement prescribed by SEBI. As the purchases were made at one go, informing stock exchanges and shareholders at two stages – after crossing 5 per cent and 10 per cent of the paid-up capital of Great Offshore – did not arise.
This move by Bharati Shipyard might have set in motion fresh thinking at the level of the regulator as to what more steps would be needed to handle such a development.
New trend
The buying of pledged shares is not something new but effecting a change in controlling stake through such exercise has happened for the first time. If such a development is repeated by another company – and theoretically there is every chance of it happening in the view of scores of promoters having pledged their entire holding or significant portion – it would mark a new trend.
According to Mr Arun Kejriwal of KRIS, the recent development in Great Offshore raises several questions: Did the new promoter act as a white knight to prevent a possible hostile takeover? Does it set a precedent? What does the development mean for the investors of both the companies?
“Though time would answer most of the questions, I feel the acquisition of Great Offshore would complement Bharati Shipyard. Bharati has cash and reserves but is short of working capital because intrinsic problems of shipyard industry, which has elongated payment cycle, and subsidy payments by Government are also often delayed. In contrast, Great Offshore is cash rich,” he added.
In a note, Emkay Securities said after clarity emerged on acquisition and change in controlling stake in Great Offshore, the outlook for Bharati has turned negative, particularly in the light of the probability that 15 per cent threshold might not be crossed to trigger 20 per cent open offer.
Source: Bloomberg.com