Triveni Engineering, a leading sugar manufacturer in Uttar Pradesh, after completing purchase of over 25 per cent stake in another listed firm Sir Shadi Lal Enterprises, which has two manufacturing units -- Upper Doab Sugar Mills and Shamli Distillery & Chemical Works – in UP’s Shamli district, had announced an open offer to take its share to 51 per cent to get management control.

However, as time runs out with no sign of getting an opportunity to buy the desired shares, either Triveni may have to sell its stake to another buyer and exit or pay higher price to buy the share from minority shareholders.

“The company may not increase the offer amid skyrocketing expectations by the shareholders of Shadi Lal. As it cannot either put that into a bad investment after ₹35 crore already paid, Triveni will have only option to exit and in that event the share price of Shadi Lal may again return to what it was before the stake purchase,” a source closely monitoring the development said.

Triveni Engineering declined to comment on the issue including the option to exit. Sources said that Triveni is yet to get SEBI’s nod for its open offer. It had already said that Triveni was ready to buy at same ₹262.15 per share at which it bought the 25.43 per cent share.

When Triveni entered into an agreement with one of the two promoters of Shadi Lal on January 30, the share price of Shadi Lal closed at ₹156.80 at BSE. It reached a peak of ₹383.30 on February 19 and on Tuesday closed at ₹330.70/share.

Interestingly, Shadi Lal on March 27 had shared with BSE Independent Valuation report, conducted by Sundae Capital Advisors Private Limited wherein it is mentioned the “Weighted Average Price” as ₹1,221.70 per share.

“Based on our analysis, as described, and subject to the assumptions presented herein, the value of the company coming highest through Net Asset Value post considering Fair Value of Land so we are considering the same as benchmark of fair value and in our opinion the estimated fair value per share of the Company as on December 31, 2023 is ₹1,221.70,” Sundae Capital Advisors said in the report.

The tentative last date by which a committee of independent directors of the Shadi Lal is required to give its recommendation to its Shareholders for the open Offer and the actual date of publication of the recommendations by the committee of independent directors in the revised schedule was March 20, 2024.

As the reputation of Shadi Lal among sugarcane farmers was not good due to non-payment of sugarcane dues in time and it is one of the few regular defaulters in cane payment, many experts wonder how the share price valuation could be on the basis of land assets and by same logic the government could have earned many more from disinvestment.

The UP government last month had called top officials of Shadi Lal to explain why cane payment is not made after protest by farmers. The company is said to have not yet cleared over ₹200 crore dues to the farmers for the 2022-23 season. However, it is paying cane dues of this year.

The Board of Directors of Shadi Lal at its meeting held on March 30 decided to hire a Professional to assist the Company for exploring various options of getting Capital from the open Market, to examine the market trend and provide a well informed proposal with the lowest cost to pay off the Cane Growers Liability (for 2022-23 season), the company said in a regulatory filing last week.