Mumbai: Sugarmakers Balrampur Chini Mills and Bajaj Hindusthan on Tuesday denied that they were in stake sale talks, sending the former’s shares down as much as 11.25%.
Local media including The Economic Times, the paper’s channel ET Now and Hindu Business Line among others reported last week that Bajaj was in talks with Balrampur Chini to buy 36.5% stake from its founders for Rs2,400 crore.
The reports had prompted traders to build long positions in Balrampur, anticipating the deal would happen at Rs180-200 a share, analysts and dealers said.
“As the deal is not happening, selling pressure has emerged in Balrampur. People are squaring off their positions,” Pranshu Mittal, sector analyst with Centrum Broking said.
“For Bajaj, it is good the deal didn’t happen or it would have meant financial strain for the company for another two years,” he added.
Meanwhile, a senior Kolkata-based official at Balrampur, who is also a board member, told Reuters it was not in discussions with anyone for the sale.
“We have no plans to sell stake right now,” he told Reuters under condition of anonymity. “We are not in talks with anyone either.”
However, the company said in its statement to the stock exchange it held some talks with Bajaj to discuss “future business strategies.”
The sugar industry, which is highly fragmented at present, may see some consolidation in 2010 as soaring prices have left bigger players with surplus cash.
“Sugar companies will perform very well in 2010 due to higher prices of sugar so they will have surplus cash in their book for buyouts,” Vikaram Suryavanshi, sector analyst at Karvy Comtrade said.
“There are huge numbers of smaller players in this sector. The fragmented nature of the industry will lead to consolidation in the future,” he added.
Shares in Balrampur Chini finished 10.05% lower at Rs134.3 while Bajaj Hindusthan ended flat at Rs196.55 in a weak Mumbai market.