Modis To Increase Stake In Modi Rubber To 51%

The B K Modi-V K Modi combine has decided to consolidate its equity holding in Modi Rubber Ltd (MRL) from 25 per cent to over 51 per cent. The group has roped in Hong Kong & Shanghai Banking Corporation (HSBC) to provide a blueprint on increasing its stake in the company.

B K Modi chairman of the group said: "Our main aim is to consolidate our holdings so that the promoters have majority equity stake in the company. We have hired HSBC to work out a strategy and are waiting for their recommendations".

Modi pointed out that the promoters have been the only bidders to a offer from the financial institutions to sell their equity stake in the company. Financial institutions, which hold 43.7 per cent stake in the company, had offered their shares for sale through an open offer. "We are talking to financial institutions in this regard and no decision has been taken " he said.

Both the brothers -- BK Modi and VK Modi -- have been eager to buy out the equity holding of the domestic financial institutions in MRL. But the FIs have still not responded to this offer, which was made way back in June 1996. The Modis have a 25 per cent stake in MRL, while 31.3 per cent is held with the public and the remaining is with the FIs.

As per reports, the promoters had initiated fresh talks with the institutions in July this year. The brothers had submitted their individual bids in response to the financial institutions' open tender for divestment of their stake.

In the event that the Modis succeed in buying out the financial institutions' stake, they would have to come out with an open offer immediately to conform to the takeover guidelines of the Securities and Exchange Board of India. Their holding in the company would be around 59 per cent if the financial institutions divest their stake completely in favour of the promoters.

The financial institutions had earlier appointed SBI Capital Markets to divest their stake in Modi Rubber. But the deadline for submitting "techno-financial proposal" or the bids kept getting extended since there were no bidders to buy the 43.7 per cent stake of the institutions.

Unit Trust of India (UTI), Industrial Development Bank of India (IDBI), Industrial Finance Corporation of India (IFCI) and leading insurance companies hold 44 per cent in MRL.