Institutions Repose Faith In Canadian Major

Leading financial institutions like Life Insurance Corporation of India (LIC) and Unit Trust of India (UTI), which hold a 36.1 per cent stake in Indian Aluminium along with General Insurance Company (GIC), have reposed complete faith in the Canadian aluminium major Alcan.

UTI chairman G P Gupta, LIC chairman G Krishnamoorthy, GIC officials, IDBI officials and ICICI officials met yesterday and decided to tender their entire holding in favour of Alcan.

"All institutions decided to offload the stake yesterday. They (Alcan) can acquire only 20 per cent and the rest would have to be returned to us," Gupta told Business Standard.

 

LIC chairman G Krishnamoorthy said that institutions have no problems in keeping the remaining stock due to the presence of Alcan.

"Alcan's presence in the venture with Indal has resulted in institutions deciding in their favour. We believe that the company should perform better following greater holding from Alcan," he told Business Standard. UTI's Basudeb Sen added: "Alcan will be more interested in the company now that it has the majority stake. So it will not be bad to hold on to some of the stock."

Analysts say that Indal now becomes an MNC stock which will give it higher discounting in the market.

"This re-rating will help FIs to realise better returns in the future," said one analyst.

Institutions expressed satisfaction at the manner in which the bid and counter-bid were handled.

"All takeover deals are very dynamic. A quick decision for investors is not possible in the light of changes made in the offer. However, one must appreciate that the entire process was handled in a professional and transparent manner by merchant bankers on both sides," Gupta added.

They also expected that the stock to be held back by institutions will result in more value for them. The Alcan offer is only for 20 per cent of Indal stock.

"All mergers and acquisitions should add value for shareholders. The deal struck by Alcan with another party at Rs 200 should result in value more than Rs 200 for other shareholders in the long run," Gupta said.

The co-ordination between institutions is expected to continue in future.

"We cannot have a common set of rules for taking a decision on takeover offer. Each case has to be decided on its merits. However, we will continue to co-ordinate in future," Krishnamoorthy added.