Will they bite it?

Mumbai, June 17: Two big-ticket open offers currently under way have put many shareholders in a dilemma. The Aditya Birla group’s Grasim Industries is offering to buy 30 per cent of UltraTech CemCo and Avaya Mauritius 20 per cent of Tata Telecom.

Grasim Industries wants to pick up 3.73 crore shares of UltraTech CemCo (formerly a part of L&T) at Rs 342.60 apiece. According to analysts tracking the industry, it is a generous offer.

However, UltraTech CemCo is not listed on the bourses, leaving shareholders clueless about the market price of the shares. “Shareholders should ideally have the right to know the value of the shares. It would have been better if the shares were listed first and then the open offer announced,” said Arun Kejriwal of Kejriwal Research and Investment Services, admitting that the open offer is attractively priced.

In the case of Tata Telecom, soon after the Tatas exited by selling their stake to Avaya — its joint venture partner — the US firm made an open offer for an additional 20 per cent at Rs 220 per share, in line with Securities and Exchange Board of India (Sebi) regulations.

The open offer rate is close to the prevailing market price. However, in an otherwise lacklustre market, the Tata Telecom share today touched an intra-day high of Rs 222.90, more than the offer price, before closing at Rs 215.80.

The Tata Telecom market price is too close to that offered by Avaya to make it attractive for the shareholders.

A few shareholders cited the instance of Infomedia Ltd’s (formerly Tata Infomedia) open offer. The Tata group’s 50 per cent stake in the company was acquired by ICICI Venture for Rs 176 per share, aggregating Rs 100.7 crore in a cash deal. ICICI Venture made an open offer to acquire 20 per cent publicly-held shares. However, the Infomedia shares closed at Rs 198.40 today, with shareholders even getting bonus shares recently.

Shareholders who accepted the open offer have missed the opportunity of making more money, a former shareholder rued.

UltraTech CemCo, meanwhile, will earn an extra Rs 3 per share over and above the offer price of Rs 342.60 per share.

Grasim Industries, the acquirers of the cement business of L&T, have put Rs 1,259 crore in an escrow account for the purchase of 38.5 per cent of CemCo shares — 30 per cent from public and 8.5 per cent from L&T.

The 5.3 per cent interest earned on the amount deposited in the escrow account will be distributed among those who participate in the open offer. This would amount to the additional Rs 3 per share, sources said.

Many brokerages have advised clients to use the open offer to sell CemCo shares. “We believe the offer price is attractive considering the reported earnings of UltraTech Cemco in 2003-04,” said Refco Global, a premier brokerage.