In the first evidence of what stance institutional investors would take with respect to the open offer made by the new owners of Shanthi Gears Ltd (SGL), SGL has announced that various mutual fund schemes of HDFC Mutual Fund have tendered more than 75 per cent of their cumulative holdings under the open offer.

The decision by HDFC MF should vindicate the expectations that after the closing of open offer, SGL’s share price might retreat in the secondary market since the price per share of Rs 81, which the Murugappa Group company Tube Investments of India Ltd offered to pay (the same it had paid to acquire 44.12 per cent stake from the erstwhile promoters of SGL), was at a premium to the then market price.

Shanthi Gears’ disclosure to the stock exchanges revealed that HDFC AMC has sold 59,66,905 shares to the acquirer through the open offer constituting 7.30 per cent of the total share capital of SGL.

The AMC, through seven of its MF schemes, has held 76,40,099 shares in SGL forming 9.35 per cent of its equity capital and after the sale, the HDFC AMC’s shareholding in SGL, through different schemes, would come down to 16,73,194 shares or 2.05 per cent of equity.

According to the data furnished by HDFC MF, of its seven funds that held stake in Shanthi Gears five of them have completely exited from SGL.

Only HDFC Prudence Fund with 1.03 per cent equity stake (8,42,006 shares) and HDFC Mid-Cap Opportunities Fund with 1.02 per cent equity stake (8,31,188 shares) would still own shares in SGL.

Another HDFC group company to own share was HDFC Standard Life Insurance Company that has a 5.03 per cent stake in SGL which has a share capital of Rs 8.17 crore.

The institutional shareholding in Shanthi Gears was a healthy 18.51 per cent pre-open offer (as on September 30, 2012) and it remains to be seen how many of the institutional investors have surrendered how much of their stake under the open offer.

Next to MFs, insurance companies were a major shareholder in the company owning 7.71 per cent stake and FIIs held a 1.85 per cent share. Financial institutions/banks hold a miniscule 0.01 per cent.

While institutional investors hold an 18.51 per cent stake in SGL, individual investors hold a substantial 37.36 per cent share in equity as on September 30 this year.

Tube Investments have made an open offer to acquire up to 26 per cent stake in Shanthi Gears and it is not clear how the other investors, particularly institutional investors, have responded to it.

Shanthi Gears’ shares were trading at Rs 58.30 ( share face value Re 1) in the NSE at around 1 pm with a trading volume of about 84,000 shares.

The stock never touched the open offer price in the secondary market and the highest it reached on the NSE was Rs 76.50 on Oct 3, 2012, which also was its 52-week high.

(This article was published on November 12, 2012)
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