 "A man waits at a bus-stop with an advertisement of Larsen & Toubro outside the company's manufacturing unit in Mumbai")
Consequently L&T’s stock price declined around two per cent on Friday’s session to trade at Rs 1.417 levels — almost mirroring the in floor price set for the Suuti transaction. But experts say that the Friday’s decline is a positive surprise to them as the market was bracing for a steeper fall. Sources close to the transaction suggest that the window of discount was limited as most of the shares were procured by institutional investors who already had significant exposure to L&T. “If these investors were to buy Suuti’s stake in L&T at a discount higher than what was offered, it would have been difficult to average out their total holding value on L&T”, the investment banker adds.
According to another source, 70 per cent of the stake was acquired by domestic institutional investors (DIIs) and with insurance companies (such as Life Insurance Corporation of India) playing a key role in the process. “Investors such as LIC is already holding over 15 per cent stake in L&T. If these investors were to procure additional stake in L&T at a significant discount, they may have to account for a mark down in their investments value, which they won’t be comfortable with”, says a market expert.
A few are also of the view that as the transaction on Friday was more to test the water, the price discounting wasn’t as steep as estimated. Gupta has indicated that another tranche of 1.5 per cent stake in L&T held by Suuti may also be offloaded in the coming months. However the government does not plan sell Suuti’s stake in Axis Bank (11.53 per cent) and ITC (11.17 per cent). Post Friday’s stake sale, Suuti’s holding in L&T reduced to 6.82 per cent.
