Mumbai: Shares of Bharati Shipyard Ltd rose nearly 10% while Great Offshore Ltd was up as much as 6.7% on Tuesday after the latter’s founder pledged more shares with a Bharati unit, triggering talk of a likely open offer.
Great Offshore founder and managing director Vijay Sheth pledged an additional 2.15% on 2 January, a stock exchange notice late on Monday showed, taking the total amount pledged with two Bharati Shipyard units since December to 14.87%.
Sheth, who owns 15.73% of Great Offshore, pledged the shares for a loan of about Rs200 crore, a spokesman for shipbuilder Bharati said.
Dealers said the shares rose amid speculation the transaction exposed Great Offshore to a takeover bid if the loan is not repaid, but analysts doubted whether Bharati had the resources for such a move.
“I don’t think they can go for an open offer because they don’t have that kind of cash,” a Mumbai-based analyst, who didn’t want to be named, said.
“The open offer, if at all, would come in at Rs360 or so, and they don’t have that kind of money to buy another 20% in the company.” Indian takeover regulations require an open offer to be made if 15% of a company’s shares are acquired by someone else.
The Daily News and Analysis newspaper on Tuesday quoted the managing director of Bharati Shipyard, P.C. Kapoor, as saying an open offer could not be ruled out if the loan was not repaid, though no such decision had been taken.
Reuters was unable to reach Kapoor. But a Bharati spokesman said talk of a takeover was speculative at this stage.
“This happened because the promoters are very close to each other and there are good business interests,” the Bharati spokesman said, referring to the loan against shares.
Bharati Shipyard has about $230 million (Rs1,120 crore) worth of orders from Great Offshore for a rig due for delivery in May next year and a multi-purpose supply vessel to be delivered in September.
“Out of this, as of 30 September, already $105 million has been advanced towards the orders,” Great Offshore’s spokesman said.
Media reports said Sheth’s 15.73% stake had earlier been pledged with creditors, including IL&FS and Motilal Oswal in June 2007, but he came under pressure following a plunge in the shares of Great Offshore, prompting the move to borrow from Bharati.
Dealers said the acquisition would be beneficial for Bharati Shipyard as Great Offshore is an asset-rich firm.
“Great Offshore is a good company to have in your portfolio. There’s good amount of value in the company but it would be slightly heavy for Bharati’s balance sheet,” another analyst said.
Shares of both companies came off highs as the market eased.
Bharati Shipyard’s shares were up 5.41% at Rs84.75 while Great Offshore shares were down 1.54% at Rs274.60 at close on the Bombay Stock Exchange on Tuesday.