BPCL shelves equity float

BHARAT Petroleum Corporation has decided go in for market borrowings to fund acquisition of the Kochi and Numaligarh refineries while shelving an earlier proposal to float equity for the purpose. BPCL, which had earlier planned a public issue for buying the government stake in the two stand-alone refineries, will resort to market borrowings to fund most of the acquisition, senior company officials said. While the corporation is expecting to complete the evaluation of the two refineries soon, it has sought government approval for the borrowing proposals and was expecting to complete the transaction by the end of current fiscal, sources said. Acquisition of the two stand-alone refineries, estimated to cost around Rs 800 crore on the basis of market price plus premium, would increase BPCL's refining capacity from the present nine million tonnes to 19.5 million tonnes. "With a healthy debt-equity ratio of 0.7-1, we would be funding the acquisition mostly through market borrowings and the remaining would come from internal accruals," they said. The government had last year decided to sell its 55 per cent stake in the 7.5 million tonnes Kochi Refineries and the 19 per cent stake held by oil marketing company IBP in the 3-million tonnes Numaligarh Refinery to BPCL. Following the acquisition, BPCL will be the majority share holder in both the companies

Kotak, Pannier merger swap set at 25:1

The board of Kotak Mahindra Finance limited (KMFL) today recommended a swap ratio of 25shares of KMFL for every share of Pannier Trading which has 75 per cent equity stack in Kotak Securities. This effectively values the entire Kotak Securities business at Rs. 160 crores at the current market price of KMFL. The valuation was arrive at following the recommendations of Deloitte Haskins & Sells and VC Shah & Co. The KMFL board also proposed to acquire the foreign exchange broking business of Day Kotak, with the paid-up capital of Rs. 50 lakh. The foreign exchange broking business will be under taken by the new arms of company, likely to be christened Kotak Forex Broking Company. After the merger, the Kotak Securities will become a subsidiary of KMFL. Goldman Sachs will continue to hold a 25 percent stake in KS. The paid-up capital of KS will go up to Rs. 59.25 crores from Rs. 45.9 crores. The KMFL script gained 11.44 per cent on the Bombay Stock Exchange today to close at Rs. 89.15. “ I am planning to channel all my business in interests in financial services through KMFL,” said vice- chairman Uday kotak whose stake in the company will go up to 54 per cent from the current level of 40 per cent after the merger. The non-banking finance company has been planning a banking venture. “ We are looking at three options- applying for a bank lincence, converting ourselves to a bank or acquire the existing bank. An in-house team is reviewing the options,” said Kotak adding,” We will take the rout which will benefit our shareholders most.” KMFL is able to conform to the Reserve Bank of India’s guidelines on new private sector banks, Kotak pointed out. In the run up to becoming a bank, KMFL wants to expand the product range and turn into a complete boutique of financial services---as set financing, investment banking, mutual funds, life insurance and the broking and distribution business. On the merger of pannier Trading with KMFL, Kotak said,” The merger will help KMFL in two ways. Firstly, it will complete the capital market business model, thereby making KMFL a dominant player in the capital market. This will also bring synergies among the other retail activities of the company.” KS has a 20,000 customer base of secondary brokerage and 1,50,000 customer base in the primary market. It is planning to focus more on the retail business.” We plan to reach 50 retail branches by next year,” said Kotak. The security trading arm of the company has plans to grow the off-line secondary market client business to 50,000 in a year and expand reach among non-resident Indian through international services.

Dalmia to keep Gesco shares from open offer

Anurag Joshi & Vivek Law MUMBAI ABHISHEK Dalmia will retain whatever shares he will receive under his open offer for Gesco Corporation, as the Sheths have said that they have not entered into any deal with him to buy the shares received under the offer. Sources do not rule out Dalmia off-loading these after offer closes. “There is no deal between us and Mr Dalmia for the shares that he gets under his open offer. He can keep these shares or probably dispose them in the market. It is for him to decide,” a source involved with the Sheth-Mahindra combine told ET. Sources said that the decision to hand over a higher price to Mr Dalmia was also to compensate him for the shares that he may be forced to retain under his open offer. “There is bound to be an oversubscription in our offer, and shares would be accepted on a proportionate basis. Therefore, whatever shares go to Mr Dalmia would have to be accepted by him,” said a source. Though Dalmia has sold his entire 10.5 per cent equity to the Sheth-Mahindra combine, his offer is technically still open till January 25, 2001. The Sheth-Mahindra offer also closes on the same date. With Sebi’s takeover regulations making it virtually impossible for an open offer to be withdrawn, Mr Dalmia could find himself saddled with a certain percentage of equity of Gesco, since his offer is still open, albeit at a price of Rs 45, which is lower than the revised offer of Rs 54 per share of Gesco. This is for two reasons. There could be some shareholders, who would have already sent their shares to Dalmia’s offer, as it has been over a month since it was announced. But crucially, there may be some investors who would like to get their entire lot of shares accepted under the open offer. The Sheths’ offer is for 33.5 per cent shares and is at a higher price than Dalmia. Therefore, it is likely that their offer will be oversubscribed. In this case, shares will be accepted on a proportionate allotment basis and a number of investors could see only part of their shares accepted under the open offer. The flip side is that Dalmia’s offer is for 45 per cent, and all probability, he will garner much lesser shares than the other party. This clearly implies that all shares will be accepted, as in the given circumstances, his offer will not be over-subscribed. The choice for investors is therefore two-fold: one, to opt for the higher price, but with no guarantee of full acceptance of shares submitted. The other option is to go in for a lower price, with a full chance of all the shares getting accepted. In the past, investors have often been left saddled with a few shares, which were returned owing to an over-subscription. Source: The Economic Times Dated: 10 January 2001