The promoter of ABB Limited, the Switzerland based ABB, will make an open offer to raise its stake in the Indian arm.
The Switzerland based power major wants to purchase 4.85 crore shares from the open market at a price of Rs 900/share.
This was a 30 per cent premium to ABB’s closing price on Friday. The stock was up 23.44 per cent on BSE on Monday, closing at Rs 831.45.
At the proposed open offer price, the entire transaction will be worth close to Rs 4,400 crore.
Post transaction, the promoter shareholding in ABB will increase from 52 per cent now to 75 per cent. Market sources feel that this may be the first step towards an eventual delisting.
The stance taken by LIC, which holds 16 per cent in the company, will decide the acceptance ratio — the number of shares purchased versus the number of shares that are tendered by the shareholders. Subject to regulatory clearance, the offer would start on July 8 and end on July 27, the company said in its statement.
Market sources see the move as a step towards an eventual delisting. In the early part of last decade, several MNCs with listed arms in India, including names such as Cadbury, Wartsila, Reckitt & Benckiser and Phillips were delisted from the Indian exchanges after the parent companies bought out most of the minority shareholders. Some of these had run into trouble with minority investors, especially on the issue of price.
Many of the brokerages that cover ABB say that the financial numbers of the Indian arm have been disappointing for the past several quarters.
Some of the brokerages such as Citi, HSBC and JP Morgan have underweight/sell ratings on the stock.
Meanwhile, Siemens, which is also the listed Indian arm of a Europe based capital goods MNC, saw its stock price shoot up over 5 per cent.
“The Indian arms of multinational pharma companies are also likely candidates for future delisting,” says the research head of a brokerage house.
“These businesses are going to be very profitable in the growing Indian market, so the parent firm doesn’t want to share the gains with minority shareholders,” he adds.