Takeover Blues

There are certain industrial houses which take over well-run companies paying good dividend and bonus. But when these are sold to big houses their prices start falling in the market. No dividend is paid and there is no question of their issuing bonus shares. The companies start losing and poor shareholders suffer.

The RPG group has taken over Stone India Ltd. At that time, its price was above Rs 60 per share. It had a good track record of rights and bonus. The factory is situated in the city area with huge land at its disposal. After the takeover, no dividend has been paid and share prices have come down to Rs 8. RPG has also taken over the famous Swedish firm SAE India Ltd which was paying a good dividend to was also giving bonus and rights liberally. When it was taken over, its price was over Rs 800 per share. But the prices now are only Rs 39 per share.

 

CESC was also taken over by this house and the price of its shares have come down from over Rs 100 to below Rs 40. The firm issued rights in respect of Ceat Tyres at a premium of Rs 65 i.e. the shares have been issued at Rs 75 but the prices have come down to Rs 30 approx. There are many other companies that this house has taken over but the result is same. Why?