What price open offer?

Uday Chatterjee
20 October 2002

Mumbai: Grasim Industries proposes to acquire an additional 20 per cent stake in Larsen and Toubro Ltd (L&T) at Rs 190 per share, aggregating Rs 945 crore, through the open offer route shortly. This decision was announced by the company last week.

The open offer is slated to commence early December 2002 and close early January 2003. Currently, Grasim holds a 14.48-per cent stake in L&T. If the open offer goes through, Grasim's stake will rise to 34.48 per cent.

The cost of this open offer will be mainly met through internal accruals. The acquisition would be done by Grasim and its wholly-owned subsidiary, Samruddhi Swastik Trading and Investments, acting in concert, the company said in a press release.

The offer price of Rs 190 per share is higher than the average price of Rs 174.93 per share over the last 26 weeks and Rs 170.08 over the last two weeks on the National Stock Exchange, which has the highest trading volumes for L&T.

However, the share price of L&T ended on 17 October 2002 almost at Rs 190. Thus the offer is unlikely to elicit much interest from L&T shareholders, as the offer price is almost the same as the current market price.

“This price is not likely to attract investors, especially the financial institutions, which hold a major chunk of the equity of the company,“ says an analyst. Financial institutions are understood to be reluctant to participate in the offer though there is no official word from them yet. It is learnt that foreign institutional investors want more than Rs 300 per share.