Promoters to hike stake in Hindalco by 5%
The promoters of Hindalco, Kumar Mangalam Birla, his family and associates, will hike their stake in the company by 5% as cheap share prices and the fear of hostile raids spur promoters across the country into adopting defensive strategies.
By TNN |
MUMBAI: The promoters of Hindalco, Kumar Mangalam Birla, his family and associates, will hike their stake in the company by 5% as cheap share prices and the fear of hostile raids spur promoters across the country into adopting defensive strategies.
“On whether the promoters are planning to increase their stake, I would say, yes... through the creeping acquisition route,” Mr Birla said while answering a shareholder’s query at Hindalco’s annual general meeting in Mumbai on Friday. “We plan to continue our method of increasing the (promoter) stake for the next 2-3 years,” he added.
The Birla family now owns 25.9% in Hindalco, India’s largest metals producer which also has considerable interests in mining in India and overseas. Assuming the current rates and the existing valuation of 12 times, the promotes may have to pay about Rs 2,700 crore for the next three years to shore up their holding in the company. However, this figure can change if share prices and valuation fall further.
Regulations stipulate that promoters can buy shares of their companies from the open market only to a limit of 5% in a year. Ratan Tata, chairman of the Tata group, recently said that the Tata family plans to increase its holding in Tata Steel to thwart any threat of a hostile takeover. The Tata group, like the AV Birla group, has traditionally held low stakes in its group companies.
Many Indian business families are taking an increasingly wary look at their stake-holdings in key group companies. A combination of low share prices and the hostile intentions of predators could prove lethal to their interests, they feel.
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“It is better to be safe than sorry,” Sajjan Jindal, vice-chairman and managing director of JSW Steel, India’s third-largest steel maker, said recently while announcing plans to increase his family holding in JSW Steel to 49% from about 45%. Mittal Steel recently achieved a hostile takeover of France’s Arcelor, which has also added to the nervousness of promoters, especially in the steel sector. “There has been a sharp increase in shareholding interest in Hindalco, with the number of shareholders more than doubling to 394,000,” Mr Birla said. Last year, the number of shareholders was 170,000.
Shares of Hindalco Industries fell 1.9% to Rs 162.45 on Friday.
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