Uti, Fis To First Weigh Delisting

Decision on open offer for SRF Finance

Unit Trust of India (UTI) and the other major financial institutions (FI) are as yet undecided about offloading their holdings in response to GE Capital's open offer for SRF Finance (SRFF) and will weigh the delisting possibility carefully before taking a final decision. The financial institutions hold between 20 and 22 per cent of the SRFF equity.

Highly placed sources in UTI told Business Standard yesterday the overwhelming considerations which would ultimately lead to a decision on offloading the shares would be the possibility of the company getting delisted, the holding cost for the institutions and the future prospects of the company.

 

UTI will also see which way the other the financial institutions were moving before arriving at a final decision. The delisting issue is crucial despite the fact that GE Capital has made an offer for only 34.47 per cent of the SRFF stake because it will invoke the minimum shareholding norms of the Securities and Exchange Board of India (Sebi). The Sebi guidelines stipulate that a company's shareholding must be widely distributed with a minimum of five shareholders for every Rs 1 lakh of equity. Besides, a minimum public holding of 25 per cent is necessary for a company to continue as a listed company, UTI officials pointed out. "We have not yet weighed the considerations in detail. But we will do so shortly and decide on our course of action," UTI sources told Business Standard.

The situation is simple: If UTI feels there is still a very high potential for the company to perform better after the change in management, it may still continue to hold the stake in spite of a possibility of the share being delisted.

We are not debarred from investing in unlisted stocks. So that way things do not change.

On the other hand, if we feel the company continues to have potential, we may hold on, the officials said. "If we want to sell at a later stage, a negotiated deal can always be struck," said one official.

However, if the feeling is that there is not too much to look forward to, and the liquidity would also get reduced leading to a difficulty in finding an exit route, UTI might then offload in favour of GE Caps.

The holding costs and the profit on sale would also be important considerations for UTI to decide on what it would do with the stake. The views of the other financial institution would also be important for UTI, but sources said a combined decision from all the FI s may not be an obvious conclusion.

The open offer became necessary following a negotiated deal GE Caps struck with Arun Bharat Ram to acquire 50.25 per cent of SRFF at a price of Rs 53.50 per share.