MUMBAI: The Australian investment bank Macquarie Bank has sprung a surprise and decided to go back on its bet on leading logistics and express delivery service provider GatiBSE 0.17 % Ltd, by cashing out of its entire 5.6% stake in the company as the legal battle between the Hyderabad-headquartered company and Goldman Sachs — over the conversion of outstanding bonds into a significant equity stake in the company – threatens to snowball into a full-blown legal war.
Last Friday, as per available market data, the ASX-listed Macquarie Bank, the largest institutional investor in the company, sold its entire 50 lakh shares, aggregating 5.69% of the paid-up capital in Gati, in the open market. The Sydney-based global lender sold its entire holding in the logistics company at a weighted average price (WAP) of Rs 176 per equity share, netting approximately Rs 88 crore from the sale.
It had bought the company’s share in May 2014 at an average price of Rs 97 per share, making over 80% returns on its investments in two years. On the day of the announcement of the stake sale, Gati’s stock was down 2.9% to Rs 175 a share. Macquarie Bank has not disclosed any possible reason for exiting the company. Citi was the banker to the transaction.
An email query sent to Macquarie did not elicit any response till press time. “Sale of its investment by Macquarie Bank is a market transaction on which company neither exercises any control nor in a position to comment on the investment strategy of an investor,” said Sanjeev Jain, director – finance, GATI in response to ET’s query. “It’s a bulk deal and reported to exchange hands with another reputable FII investor who is a foreign fund. To the best of our knowledge, it seems to have nothing to do with current FCCB litigation since FCCB matter is not new and has been going on for quite some time and since this is a secondary market transaction, it has no implication of whatsoever on the company.”
ET had reported about the Goldman-Gati legal spat in its July 13 edition. However, talking about the court case, a senior Gati official said the court has allowed the company to distribute the dividend.
Industry analysts are surprised at the timing of the move, coming just ahead of the rollout of the proposed goods and service tax (GST) that has sparked a rally in the entire logistics sector. Growing demand from the e-commerce companies has also improved the sectoral outlook considerably.
“Unlike many European peers, Macquarie Bank is doing much better and it doesn’t have any liquidity pressure. So why to sell everything at one go right after the news of the dispute became public. It also hasn’t explained its rationale to exit,” said an analyst tracking the development.
Macquarie Bank reported a net income of AUD 2.06 billion with total assets worth AUD 122 billion as of the financial year 2016, according to the lender’s website.
“I can’t comment on company specifics, but the entire logistics sector has seen a stock rally of 70 to 100% in the past one year anticipating windfall gains due to the proposed GST,” argued Mehraboon Irani of Nirmal Bang Securities.
Gati Ltd is an integrated and IT-backed multi-modal network of air, road and rail logistics provider along with a pan-Indian footprint in warehousing facilities.
The latest round of the 2-year long legal battle has gone in favour of Goldman with the city court in Secunderabad last month restraining the Indian company from pursuing any strategic corporate action like issuing fresh equity, disposing assets, entering into any joint venture with any third party or entering into any merger or de-merger. Most saw this order, which blocks nearly all key future initiatives by the company, as a debilitating blow to its future growth plans. Gati has also challenged the lower court order in the high court.
At the heart of the controversy, said multiple sources in the know, is Goldman’s efforts since February 2014 to convert the company’s FCCBs. Sources said these convertible debt instruments were originally issued in 2006 but were restructured in December 2011 and re-issued to the American investment bank.
In September 2015, high net worth individuals (HNI) investors including Ashish Kacholia and Radha Krishna Damani had also sold their exposure in the company. Morgan Stanley had also offloaded its 2.5% stake around the same time.
Secundrabad-based Gati, which at one point was struggling with high debt, has done well to improve such issues. The revenues have increased Rs 1176 crore in FY12 to Rs 1656 crore in FY16. During the same period, its net profit has more than trebled to almost Rs 50 crore from Rs 14 crore.
