GMM Pfaudler crashes 10% as promoters offer to sell shares at a steep discount

Rutam Vora Ahmedabad | Updated on September 22, 2020

Issue subscribed 120%; market participants allege short-selling

The stock of GMM Pfaudler crashed 10 per cent on Tuesday on the BSE, after the company announced that its promoters -- US-based Pfaudler Inc, Millars Machinery Company Private Ltd and Urmi Patel-- have proposed to sell 28 per cent through an offer for sale (OFS) at a floor price of ₹3,500, 33 per cent lower than Monday's closing price.

Notably, this is nearly 50 per cent of its 52-week high of ₹6,913.85, recorded more than a month ago on August 12. The stock hit the lower circuit of 10 per cent at ₹4,717. GMM Pfaudler has gained over five times this year from the lows of ₹1,357 it hit in November, 2019.

GMM Pfaudler said collectively the promoters will sell 25.71 lakh shares, with an option to sell extra 15.22 lakh shares, totalling to 40.93 lakh shares or 28 per cent of the total paid-up equity capital. At the floor price of ₹3,500, promoters intend to raise up to ₹1,433 crore.

Global acquisition

The OFS opened for non-retail investors on September 22 and got bids for 27.58 lakh shares (almost 120 per cent of the base issue). Of that, 18.4 lakh shares were with zero margin, that means bids are subject to changes on Wednesday. The OFS is open for retail investors on Wednesday, while institutions can modify their bids, too. With the OFS, promoter-holding is set to dip from 75 per cent to 47 per cent. The OFS follows the parent company's announcement to acquire majority stake -- 54 per cent -- in global business of the Pfaudler group from Pfaudler UK Limited.

Also, Patel Family, which includes Managing Director Tarak Patel and Director Ashok Patel, will acquire 26 per cent in Pfaudler Group, through one or more entities. Tarak Patel is the third generation in the family business of industrial equipment making. Last month, in an analyst concall, Patel had said the acquisition would be worth $27.4 million (₹201 crore). “The stake acquired by the Patel family will be 26 per cent for the amount of $13.2 million (₹98 crore).

This is done on a pro-rata basis. Together, GMM Pfaudler, and the Patel family will have 80 per cent control of the International business of the Pfaudler Group.”

Following this, CRISIL has placed ratings on bank facilities of GMM Pfaudler on ‘Rating Watch with Developing Implications’.

Meanwhile, some analysts and market participants vented their ire on social media. Some smart people borrowed the stock ahead of the announcement and “shorted” in the market, they alleged. With the price crashing today, they made a neat 10 per cent profit, they added.

Published on September 22, 2020

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