Chennai: P.S. Saminathan, chairman of Pyramid Saimira Group, has sought the nod of the capital market regulator to increase his stake in flagship Pyramid Saimira Theatre Ltd, or PSTL, even as the group slows expansion plans in western and northern India.
Saminathan aims to buy the entire 25% stake that fellow promoter Nirmal Kotecha holds in PSTL, a firm which owns 55 movie theatres that together have 857 screens, mainly in southern India.
Awaiting nod: P.S. Saminathan.
For now, he seeks to buy 10% stake from Kotecha, for which he is waiting for an approval from the Securities and Exchange Board of India, or Sebi.
“Besides consolidating my position in the company, this is also to ward off any possible takeover threats,” said Saminathan. “There have been takeover attempts in the past,” he added, without elaborating.
Kotecha’s exit from the company would mean that Saminathan would own some 58% of equity stake in PSTL. This includes the equity stake he would acquire once he exercises an option of converting the warrants issued to him on a preferential basis. Saminathan was issued 3.64 million convertible warrants in September, which when converted will fetch him an additional 10% of equity.
As of 30 June, Saminathan and wife Uma held 23.51% of the total paid-up capital of the company, while Kotecha held 24.89%, according to information available on the Bombay Stock Exchange (BSE) website.
Saminathan declined to name the price at which he is planning to buy equity from Kotecha.
Interestingly, he has also sought an exemption from Sebi from launching an open offer. Indian laws mandate a person or entity acquiring majority stake in a listed firm has to make an open offer to buy another 20% from shareholders.
Kotecha initially acquired 15% stake in PSTL, which he later expanded. Kotecha “has invested in shares at a very early stage and is a normal external investor”, Saminathan said. “He is exiting at a considerable profit as a part of normal investment strategy.”
Kotecha could not be reached for comments.
PSTL has also revised its plans for the current fiscal year to March 2009 due to the shaky external environment. The company planned to invest $250 million (Rs1,070 crore) in its distribution business but is now investing only around $75 million.
It also planned to set up an additional 185 screens in the northern and western parts of the country but now will add only 35 screens. Pyramid’s plans to acquire a distribution company in north India have been put on hold as well.
“Due to the slowdown in economy, spends on entertainment—which is discretionary—have come down drastically,” Saminathan said. “We will concentrate on strengthening our position in the south, where we have a strong foothold.”
However, Saminathan said that plans of listing its production company, Pyramid Saimira Production International Ltd, are still on the cards, and he intends to list within two-three months.
“This news is stock-price neutral, as the first tranche of the deal was done earlier this year. Since there will not be any open offer to the shareholders as this is an inter-promoter transaction, the shareholders will not get any immediate monetary benefits,” said Ambareesh Baliga, vice-president at Karvy Stock Broking Ltd. “Overall, Saminathan increasing his stake should have a positive bearing on the business prospects in the longer term.”
PSTL shares were down by around 2% and closed at Rs154.55 on Thursday when BSE’s Sensitive index, or Sensex, closed 368.94 points down at 14,724.18. PSTL traded at a year’s high of Rs551 and a low of Rs131.