Pipavav Defence slumps as R-Infra buys controlling stake at discount

Pipavav Defence and Offshore Engineering Company hit a lower circuit limit of 10% at Rs 68.85 at 10:08 IST on BSE after Reliance Infrastructure acquired the company with sole management control at a discount to previous session's closing price.

The announcement was made after market hours yesterday, 4 March 2015. Shares of Reliance Infrastructure were up 2.34% at Rs 486.

Meanwhile, the BSE Sensex was up 33.59 points, or 0.11%, to 29,414.32.

On BSE, so far 4.58 lakh shares were traded in the counter, compared with an average volume of 28.42 lakh shares in the past one quarter.

The stock opened with an downward gap of 10% at Rs 68.85 and remained stuck at that level so far.

The stock hit a 52-week high of Rs 85 on 19 February 2015. The stock hit a 52-week low of Rs 33.25 on 26 March 2014.

The stock had outperformed the market over the past one month till 4 March 2015, rising 53% compared with 1.72% rise in the Sensex. The scrip had also outperformed the market in past one quarter, rising 101.05% as against Sensex's 2.86% rise.

The mid-cap company has an equity capital of Rs 736.21 crore. Face value per share is Rs 10.

Reliance Infrastructure (R-Infra) announced the acquisition of 18% stake in Pipavav Defence and Offshore Engineering Company (Pipavav Defence) at Rs 819 crore, gaining management control. R-Infra has agreed to acquire 13 crore equity shares of Pipavav Defence at Rs 63 each, a 17.65% discount to Pipavav Defence's closing price of Rs 76.50 yesterday, 4 March 2015.

Reliance Defence Systems, a subsidiary of Reliance Infrastructure, will also make an open offer to acquire another 26% in Pipavav Defence for Rs 66 per share.

As per the agreement with the promoters, R-Infra will also acquire from them additional equity shares at Rs 63 per share to ensure that Reliance's shareholding is not less than 25.10%, according to the press release. Anil D Ambani, chairman, Reliance Group, will become the chairman of the company, which will be renamed Reliance Defence.

Post the transaction, the existing promoters of Pipavav Defence will continue to retain a minority stake in the company, together with two non-executive board seats.

As on 31 December 2014, promoters owned 44.50% stake in Pipavav Defence

Pipavav Defence & Offshore Engineering Company reported net loss of Rs 70.22 crore in Q3 December 2014 as against net loss of Rs 4.77 crore in Q3 December 2013. Net sales declined 20.08% to Rs 250.96 crore in Q3 December 2014 over Q3 December 2013.

Pipavav Defence is an integrated defence, heavy engineering and offshore oil & gas assets construction company.

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