Monday, June 11, 2012

Could there be an Open offer of Nippo Batteries Co. Limited?

On 4th of June, Indian Promoters of namely P.Dwarkanath Reddy intimated the Stock Exchanges that it intends to buy 30.59% stake of company held by M/s Panasonic Corporation through block deal on Stock Exchange.

As per Sec 10(1) (a) (ii) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, it says that there can be transfer of shares between promoters without making an open offer for minority shareholders.  It further declared that price computed as per SEBI guidelines is Rs 379.68. As per SEBI guidelines Inter- promoters’ transaction cannot be more that 25% of computed price.

This transaction formally took place on BSE today, where 11,47,125 shares of Nippo Battery were sold by Panasonic Corporation and it was bought by Dwarkanath Reddy.

So far so good, they complied with all condition of SEBI guidelines, but the transaction price between promoters was Rs 490.94, which was paid by Dwarkanath Reddy. There lies the catch, as per intimation on 4th June the computed price was Rs 379.68; hence the transaction price cannot be more than 25% of computed price which comes to Rs 474.60 but the transaction took place at Rs 491/-

Since the transaction price is above the SEBI defined price band, it compels me to think weather this is a computational or procedural error OR is it a consciously traded price to come in the ambit of open offer?
Based on above facts and interpretation of SEBI guideline and since the traded price is above SEBI defined price formula I infer that there has to be an open offer by Mr. Dwarkanath Reddy for 25.10% of Shares at Rs 491/-. I believe there is no place for errors and promoter must have taken a conscious decision for making the open offer.

At today’s close of Rs 402/-, the acceptance ratio in case of open offer will be 100%.

This is not a recommendation to anybody whatsoever to buy or sell this share, but it is my thought process and views on this topic.

 I welcome your critical comments and suggestions

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