Life Insurance Corporation (LIC) is nudge Swiss engineering firm ABB to raise the open offer price made to public shareholders of its Indian support, in which the insurer holds 16.3(%) per cent. ABB has presented to buy 4.9 crore shares in its domestic arm at Rs 900 respectively through the open offer closing on July 27, to move up its stake to 75(%) per cent from 52(%) per cent currently.
In a unusual request of India’s largest institutional investor playing an objector for public shareholders, LIC, which has mostly been a inactive investor so far, has asked ABB to raise the open offer price to Rs 950-1,000 per share, according to a basis privy to the subject.
“Tomorrow (Friday) is the last day for the company (ABB) to modify its (open offer) price. We will take a sight based on the revision, if any,” a top LIC official told ET on Thursday, requesting mystery.
In reply to a query, ABB’s spokesperson said, “As a matter of principle, ABB does not comment on market rumours.”
If ABB manages to induce LIC to give up all its shares in the open offer, the Swiss parent will hold around 65(%) per cent in ABB India. But, it is not clear whether LIC will surrender all its shares in the open offer, which opened on July 8. LIC holds the shares in ABB crossways various schemes. Other key public shareholders in ABB include Aberdeen Asset Managers, which holds 3.55(%) per cent, ICICI Prudential Life Insurance Company —1.5(%) per cent and General Insurance Corporation of India —1.4(%) per cent.
Bankers said a buyer can raise the price prior to the last 7 days of the open offer’s close. “If LIC has managed to push ABB to this phase, it looks like it is serious about getting a high price for the venture, but you never know,” said a top official with a domestic investment bank.
ABB shares on Thursday closed flat at Rs 869.85 in a feeble market. It is still at a 3(%) per cent discount to the open offer price of Rs 900. The decision by ABB to buy back shares of its Indian arm on May 17 came when the stock was reeling under selling demands after ABB dissatisfied the market with its January-March quarter results. The company posted a 91(%) per cent dip in net profit in the quarter, exhausted down the stock by 16(%) per cent in two weeks. ABB’s announcement to buy back shares boosted the share price by 29(%) per cent.
Share buybacks are careful by investors as a signal by the parent that its stock is worth at least the open offer price. The logic is promoters know best about the company’s prospects. Promoters usually use share buybacks to arrest a slide in their stocks or to boost them.
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