Shares of Pipavav Defence and Offshore Engineering Company, which is selling controlling stake in the company to Anil Ambani-led Reliance Infrastructure Ltd (RInfra), declined sharply this morning, apparently as the acquisition price was below market expectations.

The market disappointment could be gauged from the fact that the stock, which lost 9.94 per cent or Rs 7.60, had sellers for 72.37 lakh shares with no buy quotes.

Shares of two other companies, which were believed to be suitors for stake buy in Pipavav Defence - Mahindra & Mahindra Ltd and Hero MotoCorp Ltd, also moved in opposite direction.

RInfra had announced that it will pick up 13 crore shares (18 per cent stake) in Pipavav at Rs 63 per share for around Rs 819 crore. Apart from buying additional shares to ensure that its stake is not less than 25.10 per cent, it will also be making an open offer at a slightly higher price of Rs 66 per share in Pipavav Defence as per norms.

The share price of RInfra is trading in the green after weak opening in the morning. The stock is up by Rs 8.50 at Rs 483.90. But Pipavav recorded a sharper decline. It fell 9.94 per cent or Rs 7.60 to Rs 68.85 on the NSE.

This could be because the rate of acquisition by RInfra and the open offer price of Rs 66 were much less than the prevailing price in Pipavav (before the announcement) which had witnessed steady build-up ever since it was reported that large corporates were eyeing stake acquisition particularly after the Prime Minister Narendra Modi’s push for `Make in India’ initiative and his call for increasing the share of domestic manufacture in defence wares.

In fact, Pipavav had hit a 52-week high of Rs 85 on February 19 on the NSE. It has risen from a yearly low of Rs 33.15 that it had touched on March 26 last year.

M&M and Hero MotoCorp were believed to be front-runners to pick up stake in Pipavav. In fact, the promoters of Hero MotoCorp recently sold off 7 million shares from their stake in Hero MotoCorp, which they had said was to fund diversification into new growth areas following Modi Government’s 'Make in India' campaign. But there was no public comment on picking up stake in Pipavav by using this money.

With RInfra pipping both M&M and Hero group for stake buy in Pipavav, shares of both M&M and Hero Motocorp moved in different directions.

M&M shares gained Rs 1.20 to trade at Rs 1,212.30 and Hero MotoCorp shares were down by Rs 7.30 to Rs 2,614.95 on the NSE about 45 minutes into trading.

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