Mumbai, Feb. 21: Reliance today declined the government’s offer to pick up an additional 5 per cent in Indian Petrochemicals Corporation (IPCL), saying a wider distribution of shareholding would be in the greater interest of the company.
Reliance now owns 46 per cent of IPCL along with the management control and the acquisition of an additional 5 per cent equity would have raised its holding to a crucial 51 per cent.
“After evaluating the option, Reliance Petroinvestments Ltd (RPiL) has decided that a wider distribution of shareholding would be in the greater interest of IPCL. It has, therefore, decided to forego its option of acquiring an additional 5 per cent equity offered to it,” a statement said.
The government, this week, had offered Reliance the option to purchase up to 5 per cent of the equity share capital of IPCL (1.24 crore share) at Rs 195 per share or the final offer price, which would be determined through the book-building route.
Although the issue was oversubscribed more than 1.25 times on the very first day, the group’s decision may heavily weigh on the final pricing of the issue, analysts said. On Friday, the IPCL share had closed at Rs 196.30 on BSE, a tad higher than the price at which the shares have been offered to Reliance.
Analysts are not surprised by the decision. In the CMC issue, the Tatas will forego their entitlement on the same ground. The Tata group had acquired a strategic stake in CMC in the first phase of privatisation.
Most of the bids for IPCL’s book- built issue were stuck at the floor price of Rs 170 on Friday. Merchant bankers say Reliance’s decision may affect the chances of getting an attractive price from institutions, although the issue would sail through comfortably.
Small investors will get a 5 per cent discount on the price fixed for institutional investors. Small investors normally troop in on the last few days of the issue, say merchant bankers. According to officials from the lead arrangers, the issue so far has attracted a good mix of local and foreign institutions.
“The company had earlier acquired the IPCL stake at a price of Rs 231 per share, and the current offer from government at an attractive price of Rs 195 per share represents a discount of 15 per cent to the initial acquisition or open offer price of Rs 231 per share,” Reliance said.
Commenting on the offer, IPCL chairman Mukesh Ambani said “IPCL forms an important part of Reliance’s overall strategy in petrochemicals. The IPCL issue is a unique public offer and the first of its kind in the Indian capital market history where shares are being offered through a book-built mechanism in a listed company.”
“We will continue to support the government’s disinvestment programme in IPCL and we expect that many investors will participate in this issue and make it a successful offering,” Ambani said.
Reliance added that a larger number of shares offered through the public offer would enable greater participation from all categories of investors and widen the overall shareholder base of IPCL.
“The floor price of Rs 170 is attractive. We have communicated that the shares offered to us should be made available to the public,” Reliance said.