Mumbai: ABB Asea Brown Boveri Ltd and ABB Ltd (Switzerland), promoters of Bangalore-based power equipment maker ABB Ltd, are making an open offer to buy 22.89% shares in the Indian company to take their total holding to 75%, HSBC Securities and Capital Markets (India) Pvt. Ltd, managers to the issue, said in an advertisement in The Economic Times newspaper on Monday.
The companies “wish to further increase control in the target company in order to facilitate the long-term development of ABB’s business in India”, the advertisement said.
The offer at Rs900 per share was 34% higher than the stock’s close of Rs673 on Friday, prompting purchases of the scrip on Monday. It rose to Rs869 before ending at Rs831.45, a 23.44% gain from the previous close. The benchmark Sensex fell 0.94%.
The higher stake will help the company “control investments” in India, the ABB management was cited as saying in a conference call by CNBC-TV18.
“This transaction is a right step for ABB,” they said on the call. A “75% stake is similar to other emerging markets and it makes it easier for us to add new business lines and make acquisitions. Increasing the stake provides us more flexibility, but there is no intention of delisting ABB India. (We are) increasing stake as we see huge potential in India”.
Madan Gopal, equity analyst for the capital goods and power sectors at Centrum Broking Pvt. Ltd, said the move may be the first step in the delisting of the stock. “This may be a slow move towards delisting, and it shows the confidence the company’s parents have in the Indian operations despite margins down to single digit and order flows on the lower side.”
Companies typically increase stake when they think the stock price is cheaper than future expectations, he added.
The promoters don’t “have plans to make any major change to the existing lines of business of the target company or to dispose of or otherwise encumber any substantial assets of the target company in the next 24 months,” HSBC said in the advertisement. There is also no plan to change the board of directors, HSBC said.
Those holding the stock as of 4 June will be eligible for the offer, which opens on 8 July and closes on 27 July.