HDFC group to benefit more from Shanthi Gears open offer

| Updated on: Jul 13, 2012

As the promoter of Shanthi Gears Ltd (SGL) will take a substantial sum from the sale of his stake in the company to Tube Investments of India Ltd (TIIL), the next biggest beneficiary from any stake sale in the company would be the HDFC group.

The HDFC group would have the opportunity to monetise the stake because the acquirer would have to make an open offer, though it is not mandatory for any investor to participate in it.

The promoter of SGL, Mr P. Subramanian, collectively holds 44.12 per cent stake in SGL totalling 3.60 crore shares (face value Re 1). While he holds 2.82 crore shares in his own name forming 34.57 per cent, Shanthi Gears Finance P Ltd owns 7 lakh shares constituting 0.86 per cent and Shanthi Social Services owns 71 lakh shares forming 8.69 per cent of the equity, which is at Rs 8.17 crore.

The next biggest shareholder in the company as a group is the HDFC group through its mutual funds and life insurance company owning a total of 12.92 per cent of the equity.

As at the end of June 30, 2012, HDFC Mutual Fund’s HDFC Prudence Fund owned 32,41,645 shares in SGL forming 3.97 per cent. HDFC MID-CAP Opportunities Fund had 32,00,000 shares constituting 3.92 per cent and HDFC Standard Life Insurance Company Ltd had 41,09,754 shares (5.03 per cent). The total number of shares held by the group was about 1.05 crore.

The investment by the two HDFC Mutual Fund schemes and HDFC Standard Life would be worth approximately Rs 85 crore if the acquirer makes an open offer at Rs 81 per share and if they accept it. It is not clear what the acquisition cost for the three HDFC entities is. Whether or not to participate in the open offer or not and to what extent would be at their discretion.

What probably would weigh with them would be other factors including the low equity base of SGL, its strong brand value and its position in the gear and gear box manufacturing sector. More importantly, it is being acquired by a group company of the $4.4-billion (approximately Rs 22,000 crore) Murugappa Group, Chennai, which has a strong base in the manufacturing sector and huge brand visibility. Hence, they would also consider their future value accretion before they part with any stake.

The counter witnessed sale of 2.01 lakh shares on the NSE and the last traded price was Rs 63.05, up by Rs 3. There were buyers for 10.55 lakh shares of SGL, but there were no sellers on the NSE

The other major institutional shareholders in SGL are Sundaram MF’s Sundaram Smile Fund having 8.28 lakh shares, National Insurance Co having 22.91 lakh shares (2.80 per cent) and Geomatrix (HK) Ltd a/c Malabar India Fund Ltd having 12.31 lakh shares.

Published on March 12, 2018

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