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The Munjal family, which raised Rs 1,800 crore by selling a 3.3 per cent stake in Hero MotoCorp on Wednesday, is likely to announce a takeover of Pipavav Defence by this weekend, a banking source said.
The Munjals, promoters of Hero MotoCorp, had managed to close the deal by offering a better valuation and agreeing to management control of Pipavav Defence by its promoters, the Gandhis, the source added.
An agreement between the Gandhis and the Mahindra group was ready for last weekend. The Mahindras had made a better offer than others — impressed with Pipavav Defence's order book of Rs 12,000 crore. The Mahindras had valued Pipavav Defence at Rs 4,000 crore, whereas the current market value is Rs 5,863 crore — based on Thursday closing.
The Munjals, promoters of Hero MotoCorp, had managed to close the deal by offering a better valuation and agreeing to management control of Pipavav Defence by its promoters, the Gandhis, the source added.
An agreement between the Gandhis and the Mahindra group was ready for last weekend. The Mahindras had made a better offer than others — impressed with Pipavav Defence's order book of Rs 12,000 crore. The Mahindras had valued Pipavav Defence at Rs 4,000 crore, whereas the current market value is Rs 5,863 crore — based on Thursday closing.
The Pipavav Defence stock closed 2.5 per cent higher at Rs 80 on Thursday. The stock is up 62 per cent in two weeks as investors speculated about increased defence orders for the company by the Indian government and a deal likely soon.
As news of a likely Mahindra takeover came in, the Munjal family on Sunday made a better offer in terms of valuation and assured Pipavav Defence’s chairman, Nikhil Gandhi, there would not be any change in the management. The Munjals have no experience in running a defence company. Calls and text messages to Pawan Munjal, the vice-chairman, managing director, and chief executive of Hero MotoCorp, did not get a response. On Wednesday, the family said, “The group will use the sale proceeds to fund new growth avenues available through the government’s Make-in-India initiative. "
The source said the Munjals would buy a part of the promoters’ 44.5 per cent stake in Pipavav Defence, followed by a preferential offer to the Munjals. The Gandhis and Munjals are likely to hold equal stakes in the company. The Munjals, like other Indian business houses, want a foothold in the defence sector, with the Narendra Modi government planning to place a chunk of the country’s $250-billion defence orders with Indian companies over the next few years .
India’s $47-billion defence Budget in 2013 was the ninth largest in the world. India is also the world’s largest buyer of defence equipment and accounts for 22 per cent of global defence equipment imports. But local private companies do not have any significant presence in the sector.
