Race for Mallya's MCF hots up as Deepak Fertilisers enters fray

Pune firm buys 24.46% stake from open market to become largest shareholder

UB Group Chairman Vijay Mallya seems to have another battle in his hands. In a surprise and hostile move, Pune-based Deepak Fertilisers & Petrochemicals Corporation has bought a 24.46 per cent stake in UB’s Mangalore Chemicals & Fertilizer (MCF) in block deals worth Rs 180 crore from the stock market.

With Wednesday’s block deals, executed at an average price of Rs 61.75 a share, Deepak Fertilisers emerged as the holder of largest block of shares in MCF. Mallya’s UB Group had pledged 11 per cent of its 22 per cent stake in MCF with banks to avail of loans to fund its now-collapsed Kingfisher Airlines. Soon after the block deals were executed in the morning trade, MCF’s shares fell 9.94 per cent to close at Rs 56.20 on BSE.

UB Group, however, said in a statement “there is no takeover battle for MCF and UB Group will retain its control over the firm.”

Adventz Group’s arm Zuari Agro, which owns about 10 per cent stake, purchased in April, is the next biggest shareholder. Adventz Chairman Saroj Poddar said Deepak was not acting in concert with Zuari. “They must have seen a solid potential in MCF. That’s why they have bought those shares,” he said.

The shares were purchased by Deepak Fertilisers in the open market from an assortment of shareholders, including mutual funds, the firm said in an announcement to the stock markets.

Deepak Fertilisers is planning to launch an open offer for MCF in the next few days to increase its stake and give other shareholders an exit option, say banking sources. When contacted, a spokesperson for Deepak Fertilisers declined to comment. A UB group insider said the company was not selling the stake in the open market. According to another source, JM Financial was advising Deepak Fertilisers on the transaction.

Deepak will use its own funds to finance the takeover of MCF. Last year, it had put on hold its Australian ammonium nitrate project, worth $350 million, following environmental, technical and economic reasons. These funds would now be used for MCF's takeover.

But for UB, it's going to be a tough fight, as MCF is a profit-making company for the group. Mallya had to earlier sell United Spirits to multinational Diageo to help repay loans to banks.