Buy Back Offer Propels Otis
The share price of Otis escalated to a 52-week high today at Rs 315 on its parent's offer to buy back the outstanding stake in the company.
The stock closed at Rs 313.20, up 18.18 per cent over its previous close amid a volume of 2,534 shares on the Bombay Stock Exchange (BSE). The National Stock Exchange (NSE) registered a volume of 13,282 shares.
Earlier, the stock of the elevator and escalator maker had peaked on the conclusion of just one trade of a single share at 10:27 am. The outstanding buy position on the counter was over 1.76 lakh shares as there were no sellers after the one-share sale.
On Monday the scrip didn't witness any sellers even at its 10 per cent high. The same day Otis announced that the parent, the US-based US, was planning to buy out the outstanding equity of the company from the market and then probably delist the stock from the domestic exchanges.
The Otis group, which owns 80.62 per cent in the Indian unit, has set a price of Rs 320 per share for the remaining 19.38 per cent stake, a premium of 9.77 per cent to the current market price.
Analysts say that the company can delist its shares from the bourses if it manages to mop up even a 10 per cent stake through the buy-back plan.
According to the Securities and Exchange Board of India rules, a company can delist its shares if the promoters have an over 90 per cent stake in the company.
Otis, set up by K C Mahindra of the Mahindra and Mahindra group in collaboration with the Otis Elevator Co in 1953, is the market leader in the Indian elevator industry.
In October 1999, the Mahindras sold their entire stake to the Singapore-based Otis Elevator Pte Ltd, a wholly owned subsidiary of the US-based Otis Elevator Co.
Consequent to this, the stake of Otis Elevator increased to 68.90 per cent from 45.01 per cent.
Later, Otis Mauritius, a group company of the promoters, came out with an open offer to acquire the remaining non-promoter holding in 2001 at Rs 280 per share and, thereby, the promoters' holding was increased to around 80 per cent.
The company, with two manufacturing facilities at Bangalore and Mumbai, has an installed capacity of 1,800 elevators per year and boasts a market share of around 60 per cent.
In 1978, the research and development centre of Otis was recognised by the Government of India. It exports to countries in the Asia-Pacific region, Japan and other south-east Asian countries. It also undertakes software exports to Otis establishments abroad.
The company's manufacturing plant at Kandivli in Mumbai was awarded ISO 9001 certificate for design, development and manufacture of elevators and escalators recently.
Otis Elevator Company and Dongyang Heavy Industries also recently signed a stock purchase agreement to form a 50:50 joint venture company in South Korea styled Otis Korea Elevator Company Ltd to sell, install and maintain elevators.
For the second quarter ended June 30, 2002, Otis registered a 31 per cent fall in net profit to Rs 5.99 crore (Rs 8.68 crore) on a 15.51 per cent rise in net sales to Rs 75.16 crore (Rs 65.07 crore).
As on June 30, 2002, the public and foreign institutions held 10.18 per cent and 5.17 per cent stake in the company, respectively.