Mumbai: The stringent listing process on the stock exchanges and the availability of low-valued listed companies have forced the unlisted companies with strong financial health to go for acquisition of medium-sized listed companies.
Since July 2003, around five open offers were announced and another two to three are in the offing. On 16 July, Inga Management and Investment Pvt Ltd announced that it has acquired 40,000 equity shares of Rs 10 each, representing 16.33 per cent of the paid-up equity share capital of Ishwar Textiles Ltd under an agreement dated 7 July.
On 12 July, Prakash Maheshwari & Sameer Maheshwari announced an open offer to the public shareholders of Noble Explochem Ltd to acquire 29,45,700 equity shares of Rs 10 each.
On the same day, Saleem Fazelbhoy & Amzel Pvt Ltd announced that in compliance with Securities and Exchange Board of India regulations, the company is making an offer to the fully paid-up equity shareholders of Amzel Automotive Ltd.
As on date of the public announcement, the acquirers hold 5,16,009 fully paid-up equity shares of AAL, representing 86 per cent of the total and voting capital of AAL.
Similarly, on 8 July, Chhattisgarh Electricity Company and Chhattisgarh Investments Ltd along with Sarda Agriculture & Properties Pvt Ltd and Prachi Agriculture & Properties Pvt announced an open offer to the shareholders of Raipur Alloys & Steels Ltd to acquire up to 26,16,000 fully paid-up equity shares of Rs 10 each.
Says Neil Information Technology managing director Kishore P Ostwal: "With the stringent listing process by stock exchanges, it is next to impossible for promoters of small-sized companies to get listed on the stock exchanges with 40 per cent free float."
Neil Information had sometime back acquired the Bombay Stock Exchange-listed Avon Properties. An official of the Centre for Monitoring Indian Economy has pointed out that the number of open offers for little-known companies are increasing by the day even though in value terms, the quantum may not be very significant.
A section of the market believes that there is a lot of value unlocking in these small companies. "Individuals look at small companies as a good investment opportunity as these outfits have started giving good return on investments," says Anil Bagri of Oasis Capital, a Mumbai-based broking firm.
According to a senior market analyst with BCB Brokerage, a lot of small companies are witnessing an increasing number of mergers and acquisitions as promoters are looking to safeguard their own interests in some cases. "The move could be prompted by either the need to unlock higher valuation or go for a reverse merger."