Bharati Shipyard fixes open offer price at Rs 344

Bharati Shipyard, India's second-largest private shipbuilder, has fixed the open offer price to buy an additional 20 per cent stake in Great Offshore at Rs 344 a share.

This is about 6 per cent lower than the closing price of Rs 363.35 on the Bombay Stock Exchange (BSE) today. The offer will open on July 25 and end on August 13.

According to Securities and Exchange Board of India (Sebi) guidelines, the floor for the open offer price has to be the higher than the last two weeks' stock price or the last six months' average price.

In Great Offshore’s case, the average of the daily high and low of the stock for the last two weeks is Rs 343.16, while that for the last six months is Rs 257.04. The company has chosen the offer price of Rs 344, which is just the floor price mandated by the regulator.

Usually, companies make an offer that's higher than this to attract a good response from shareholders. Jehangir Adi Master, an analyst tracking the company at Mumbai-based brokerage Pranav Securities, said the lower offer price could be intentional as the company wanted to have a cushion in case of a counter offer.

"Shareholders would not like to tender the shares at such a low price, especially when crude oil prices have gone above $60 a barrel and the outlook for the industry has improved," he said.

On May 8, Bharati Shipyard said that it had acquired a 14.99 per cent stake in the company from its promoter Vijay Sheth who had borrowed money against his shares. In June 2007, Sheth had pledged his entire 15.5 per cent stake with IL&FS and Motilal Oswal, who started to seek margin money following a plunge in the value of shares pledged by Sheth.

He borrowed the money from Bharati, with whom Great Offshore had placed orders for some vessels.

However, last month, Bharati acquired the pledged shares for Rs 315 each, calling it a 'strategic investment'.

Sheth, whose stake currently is below 1 per cent, stepped down as vice-chairman and managing director of Great Offshore last Saturday, clearing uncertainties about the firm's management control.P C Kapoor, managing director of Bharati Shipyard, had earlier told Business Standard that competitors such as Punj Lloyd and ABG Shipyard had shown an interest in buying Great Offshore shares from the open market. Institutions and the public hold around 84 per cent stake in the company.

The price of Brent, the benchmark crude, has gained about 15 per cent to $66 per barrel since May 8 when the company acquired the stake in Great Offshore.