Open Offers Floundered In 2000-01: Prime

Fiscal 2000-01 saw 77 open offers hit the market, but tepid shareholders' response saw only 10 offers managing to acquire the targeted shares, according to Prime Data Base.

The balance 67 offers (87 per cent) failed, of which 13 could not elicit any response at all, said the annual report on open offers by the country's premier data base on the primary market.

The primary reason for the debacle, apart from technical issues, was the unattractive pricing of the open offers.

The number of open offers however represented a slight increase over 1999-00, which had witnessed 74 bids. 1998-99 had seen 62 offers by amount, the offer size aggregated Rs 1,584 crore compared with Rs 469 crore in the previous year, representing an increase of 238 per cent. A total of seven offers were made by foreign companies in 2000-01.

This is substantiated by the fact that as many as 66 of the 77 offers were below Rs 10 crore, of which 62 were below Rs 3 crore and 54 below even Rs 1 crore, as per Prime.

There were only 3 offers of above Rs 100 crore each. In a likewise manner, as many as 40 offers were made at a discount to the face value, 10 offers at face value and only 27 at a premium to face value.

Furthermore, according to the report, as many as 30 offers were made solely for the purpose of acquisition of a small listed company and then changing its object clause to undertake a new business.

Significantly, of these 30 companies, the new businesses of as many as 28 companies were in the information, communication and entertainment sectors.

According to Prithvi Haldea, of the 77 offers, there was just 1 hostile bid (Gesco Corporation) which too was matched by a counter offer.

While 67 offers were for takeovers, 7 were in the nature of consolidation of holdings and 1 for substantial acquisition. In as many as 11 cases, the disclosed objective was delisting from stock exchanges.

In fact, open offers, according to Haldea, are appearing to be an increasingly preferred route for delisting.

Between April 1998 and March 2001, as many as 41 companies have made open offers for delisting, most of these being good companies being taken over by their Indian promoters or good Indian companies being acquired by multinationals or domestic units of MNCs now being converted into subsidiaries.