Auto parts maker Minda Corporation on Tuesday sought the Competition Commission of India’s (CCI) approval to buy 24.5% stake in rival Pricol Ltd, according to a regulatory filing.
Minda had in February bought a 15.7% stake in Pricol for ₹400 crore in a surprise move that triggered a confrontation with the promoter group of the target company led by managing director Vikram Mohan.
Mint couldn’t reach Pricol’s promoters for comment until press time.
“The market was expecting Minda to acquire up to 26% stake, but the question is what happens after. We have to see how Minda will finance the acquisition of a larger shareholding or whether it can strike a deal with the promoter family to buyout part of their stake to achieve a majority shareholding,” an auto analyst said, seeking anonymity, adding, “It remains to be seen what valuation Pricol will get if that were to be the case, given the stock price has rallied close to 20% from the time the first 15.07% stake was bought to now”.
Pricol is Minda’s largest rival in the two-wheeler instrument cluster business. The deal may lead to further consolidation in the instrument clusters market, where Pricol has a 40-50% share with Minda holding 15%.
Private equity firm Phi Capital owns nearly 6% of Pricol, as well as 5% in Minda. This could allow Minda to enhance its stake in Pricol, if Phi Capital chooses to sell. Promoters led by Mohan have 36.53% stake in Pricol.
The rest is held by the public including banks and foreign portfolio investors.
In February, Minda purchased 19 million shares for ₹400 crore through open market deals. It termed the move as “merely a financial investment” that does not give it any special rights. However, the move is considered hostile since the promoter group of Pricol led by Vikram Mohan had earlier rebuffed buyout offers from Minda.
Foreign portfolio investors Minerva Emerging Opportunities and Aidos India sold a total of six million shares in Pricol at ₹209 each, trimming their stakes from 3.73% and 2.26% respectively. Other institutional sellers include Stream Value Fund, Aakarshan Estates Pvt. Ltd and Antara India Evergreen Fund.