'IVRCL to benefit from Essel stake offload'

The Subhash Chandra-promoted Essel group’s paring its stake in IVRCL Limited augurs well for the Hyderabad-based infrastructure major, according to IVRCL’s executive director (finance) and group chief financial officer, R Balarami Reddy.

On October 4, the Essel group had sold about seven per cent stake in IVRCL through block deals for about Rs 97 crore.

"This will remove whatever apprehensions the bankers had about IVRCL and pave the way for further funding of the company," he told Business Standard.

Following Essel’s stake sale, shares of IVRCL plunged six per cent on the BSE to Rs 44.80 on Frioday following the Essel group shedding stake in the Hyderabad company.
 

TIMELINE

• 1987: IVRCL begins operations
• 1995: Comes out with initial public offering
• 2005: Issues follow-on public offer
• Mar 2012: Essel accumulates 10.19 per cent stake in IVRCL
• Apr 2012: Essel purchases additional 5.5  million shares, raising its stake in IVRCL to 12.27 per cent
• Sep 2012: IVRCL puts six road projects on the block, decides not to bid for BOT projects for 6 months
• Oct 4, 2012: Essel sheds 7 per cent stake for Rs 97 crore

In April, the Essel group had increased its stake to 12.27 per cent in IVRCL from 10.19 per cent and stated the acquisition was “in line with the philosophy to grow the infrastructure business." With Essel's stake being a little higher than the over 11 per cent equity holding of IVRCL promoters, the market then was abuzz with the talk of an impending takeover.

However, with the Essel group companies Asia Satellite Broadcast Private Limited and Jay Properties selling IVRCL shares in block deals on Thursday, the takeover threat seems to have now fizzled out.

IVRCL’s scrip during this period also gained substantially from a 52-week low of Rs 27.10 on December 29, 2011, to a 52-week high of Rs 75.20 on April 13, 2012. The Essel group has reportedly sold the stake at about the same price at which it had acquired.

On the other hand, Reddy said the developments had led to apprehensions among bankers over the future of the company.

The Essel group is reported to have reconsidered its investments following a change in the strategy of IVRCL. Last month, the IVRCL management had decided to put six of its road projects on the block and also not to bid for BOT (build, operate and transfer) projects for at least six months.

Reddy said the Essel group never held any discussions with the IVRCL management at any point - during the acquisition of the company's stake or while shedding its stake. The IVRCL management, too, was not worried about the acquisition, as it was aware that running such a company could be difficult for an outsider.