Indian promoters, from the Tatas to the Birlas are upping their stake in group companies. But are they really under threat?
The Mahindras may soon follow the Birlas and Tatas in raising promoter stake in group companies.
Keshub Mahindra, Chairman, Mahindra & Mahindra said, “We are thinking and will do it at an appropriate time. ”
After the hostile takeover of Arcelor in June last year, the question everyone asked was, would Mittal do the same with Tata Steel, since the promoter holding is barely 26%. To which, Mittal, President & CEO, Arcelor Mittal said, “Why should Tata Steel be worried?”
But Ratan Tata is not taking any chances. Tata Steel announced a 10% preferential allotment to its promoters Tata Sons last year to hike its stake from just above 20%. Ratan Tata, Chairman, Tata Steel said, “The vulnerability when the industry is trying to consolidate is considerable.”
Another promoter defending his turf is Kumaramangalam Birla, who upped his stake in Hindalco to 31.5%, again via a preferential allotment. But Birla is not resting easy and recently announced his intention to gradually increase his stake to 50%.
But a hostile takeover may not be that easy in the Indian regulatory environment, because the Sebi takeover code requires an open offer once the hostile bidder touches 15% in the target company. That experts say, gives the Indian promoter a chance to make a counter offer.
While the M&A boom in the last couple of years has been largely outbound driven, the possibility of the action shifting to the Indian turf too cannot be ruled out. And in that scenario, a company with low promoter stake could be the obvious targets. Especially when government intervention in favour of the Indian promoter can no longer be taken for granted.
Source: Money Control