Fame India: Advantage investors

The battle to take over Fame has benefited investors in the form of a sharp rise in its share price.

India Inc is seeing a number of hostile takeover bids. After the takeover battle for Orissa Sponge Iron, and recently ABG Shipyard, corporate India is witnessing another battle between INOX and the Anil Dhirubhai Ambani group for Fame India. The good part is that investors have made gains in most of these cases.

Earlier this month, INOX Leisure acquired a 43 per cent stake in Fame India for Rs 66 crore. It acquired another 7 per cent from the market for Rs 12.7 crore and made an open offer for a further 20 per cent stake at Rs 51 a share. However, Reliance MediaWorks Limited (RML) put spanner in the works and made a hostile bid for a 53 per cent stake at Rs 83.4 a share, which is around 63 per cent higher than INOX’s offer price. It also raised its stake in Fame to 12.14 per cent post INOX’s offer.

RML has also approached the Securities and Exchange Board of India seeking a probe into the sale to INOX at a price lower than what RML had offered. It has also alleged violation of the Foreign Exchange Management Act in relation to certain arrangements made in relation to the foreign currency convertible bonds (FCCBs) issued by Fame.

The fight to acquire Fame is important for both the companies in terms of scaling up their business. For RML, which has multiplexes under the BIG brand and is the biggest player in the business with 246 screens, Fame’s acquisition will add 95 screens. It would take it far ahead of INOX, the second-largest player with 105 screens. For INOX, the acquisition will get it very close to RML.

“With both parties still slogging it out over the same company, one can expect the price to move ahead of fundamentals,” said Jagannadham Thunuguntla, equity head, SMC Capitals.

Analysts suggest that RML can gain control of Fame only if INOX sells. Else, it may look at increasing its stake to a level that it secures a place on the board. A few also believe that RML might just be looking at making the deal expensive for INOX.

With the battle over control of Fame gaining momentum, investors have been at an advantage. Fame India, hovering at Rs 30 in mid-January, has tripled since then. It was locked in an upper circuit of 5 per cent on Tuesday to end at Rs 92, which is higher than the open offer price of both INOX and RML. “Investors can ride the tide as long as no one withdraws. But, there is an element of risk as the price of Fame can drop suddenly if a solution is in sight. To that extent, investors with risk appetite can stay invested,” said Thunuguntla.

With inputs: Puneet Wadhwa & Jitendra Kumar Gupta