InGovern raises concern over Triveni Engineering's stake buy in Sir Shadi

InGovern has raised concerns over Triveni Engineering & Industries’ (TEIL’s) acquisition of Sir Shadi Lal Enterprises (SSLE).

Terming it a “hostile takeover bid”, the corporate governance and voting advisory firm has said the acquisition may face opposition and lead to two sets of warring promoters at SSLE and hamper decision making.

In January 2024, after acquiring a 25.43 per cent stake in SSLE from one of its promoters, Vivek Viswanatha, TEIL announced an open offer to buy an additional 26 per cent stake at Rs 262.15. The other set of promoters, Rajat Lal and family, currently hold 36 per cent shares of SSLE and do not intend to tender their shares in the open offer.

InGovern believes even the minority shareholders may not tender their shares as the current stock price is above the open offer price. Shares of SSLE last closed at Rs 280.3. Further, the independent valuer has assigned a valuation of Rs 1,221.7 per share, after valuing the land held by SSLE at Rs 800 crore.

“TEIL may have to sell its stake to another buyer and exit or pay a higher price to buy the share from minority shareholders… Assuming TEIL's open offer is successful, and it gets a controlling stake of 51 per cent, with Lal's family holding 36 per cent, the total promoter holding will be close to 87 per cent and will exceed the permissible limit of 75 per cent. Hence, TEIL will likely have to sell close to 12 per cent of its holding… Also, with two sets of warring promoters, any special resolutions requiring 75 per cent of votes will likely get blocked, in turn, hampering decision-making,” said InGovern in a note.

The proxy advisory firm has said the Securities and Exchange Board of India (Sebi) should appoint an independent valuer to determine the fairness of the offer price of TEIL.

TEIL is one of the country’s largest integrated sugar manufacturers and one of the largest ethanol producers.

SSLE also operates in a similar line of business, although at a much lower scale. TEIL has said the acquisition was in line with its objective of expanding its business operations in the sugar and alcohol manufacturing sectors.