Takeover battle: IVRCL investors sure to gain

The battle on the bourses between infrastructure player IVRCL and Subhash Chandra's Essel group, which has quickly bought a handsome stake in IVRCL over the past few days, has only just begun.

Almost in a classic case of a hostile bid, Essel group's stake in IVRCL now stands at 12.27 percent, up from 10.19 percent. It has acquired 55 lakh shares in IVRCL during 2-3 April, reports CNBC TV 18.

Almost in a classic case of a hostile bid, Essel group's stake in IVRCL now stands at 12.27 percent, up from 10.19 percent.

By March 29, IVRCL had bought the 10.19 percent stake in IVRCL from the open market, and had said in a statement, "In line with the philosophy to grow the infrastructure business to match and benefit from the rising proportion of infrastructure investment by India, the Essel Group has acquired a 10.19 per cent stake in IVRCL Ltd and is keen to increase it and is in the process of increasing it."

IVRCL had however sounded confident as it told various media sources that there was nothing to panic and no reason to look at it as a takeover. The company might not be so confident now as the Essel group's stake is now more than the promoter's stake of 11.18 percent.

According to Sebi's new takeover code, Essel group can take its stake up to 25 percent without triggering any open offer. As a Business Standard report points out, this could be the first case that will test the terms of the new code. If Subhash Chandra takes his stake up further, Sebi might have to take a call on the promoters and change in leadership if required, which will set a precedent for such cases.

Essel itself has a presence in the infrastructure sector through its company, Essel Infraprojects, which has interests in roads, power, water assets, solid waste management, urban infrastructure and special economic zones (SEZs).

It has much deeper pockets and IVRCL, with a debt of more than Rs 4,000 crore could stand to gain with Essel's investment. As an earlier Firstpost article pointed out, funds hold 42 percent in IVRCL, much higher than the promoter's stake and they too will welcome this new investment.

And now if IVRCL promoters also jump in to increase their stake along with an already active Essel group, retail investors will indeed be the biggest gainers. The stock is already up 17 percent in last one week, and the battle is far from over!