FIIs hold key in IVRCL takeover

The Essel Group may become the single largest shareholder in infrastructure company IVRCL, ahead of even the promoters. The group, led by media baron Mr Subhash Chandra, hiked its stake in IVRCL to 12.3 per cent from 4.9 per cent in the past week.

The promoters have 11.2 per cent stake, which will go up to 13.8 per cent after the proposed merger of subsidiary IVRCL Assets and Holdings. The Essel group will need to up its stake to 25 per cent in order to make an open offer. For that to happen, a lot will depend on institutional investor action.

Falling FII holdings

Foreign Institutional Investors (FII) and mutual funds together held 41.6 per cent in IVRCL as of December 31, 2011.

But FIIs have been steadily trimming their holdings. It had touched 37 per cent by December from 57 per cent a year ago. IVRCL's earnings have been steadily declining for a year now.

Even without touching the mandatory 25-per cent threshold, the Essel Group can gain management control if it holds more than the current promoters. The promoters may then be hard-pressed to prevent the Essel Group from gaining control if institutions decide to sell as a result of possible management change.

Infrastructure arm

Acquiring IVRCL could help the Essel group shore up its presence in the infrastructure sector.

The group's Essel Infraprojects has four operational toll roads, eight more under implementation, six urban infrastructure projects besides other smaller projects.

IVRCL also has a diversified infrastructure portfolio with unexecuted orders worth Rs 25,493 crore.

>acharya@thehindu.co.in

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