Colour Chem soared on Monday following a weighty open offer price announced by EBITO Chemiebetelligungen in its bid to acquire 20% stake in the company.
By 11:40 IST, the scrip of Colour Chem soared 9.18% to Rs 220.05. It had surged to an even higher Rs 233.95 earlier in the day. Its day's low was Rs 200. Relatively high volumes of around 91,000 shares changed hands on BSE till then.
In the 31 sessions between 19 February and 4 April 2003, the scrip lost 19.7% to Rs 201.55 from Rs 250.95, after SAT ruled that Swiss parent Clariant needs to pay 15% interest for delay over the open offer only to shareholders as on record date 24 February 1998. Earlier, between 12 and 19 February 2003, the scrip had risen 9.6% from Rs 229 on hopes that the SAT judgement on interest payment would be in favour of investors.
EBITO Chemiebetelligungen AG, a wholly-owned subsidiary of Clariant International, which in turn is a wholly-owned subsidiary of Clariant AG, has announced an open offer to acquire up to 2,330,000 fully paid-up equity shares of Rs 10 each of Colour Chem. The acquisition limit represents 20% of the equity capital of Colour Chem.
The specified date of the offer has been determined as 2 May 2003. The date of opening of the offer is 28 May 2003. It will close on 26 June 2003
Dealers say the fact that the Securities Exchange Board of India is still contesting the SAT ruling on interest payment in the Supreme Court is giving investors hope that a further ruling may prove benevolent. They feel that the Swiss parent, Clariant, may be made to pay interest to all investors, not conforming to the stipulated record date.
The SAT order came following an appeal filed with it by Clariant International and EBITO Chemiebeteiligungen AG against a Sebi directive to Clariant to pay investors an interest of 15% per annum for delay in making the offer.
In October 2002, Sebi had directed the multinational Swiss company to make an open offer to shareholders of Colour Chem for a 20% additional stake after Sebi had then also asked the company to treat 21 November 1997 as the reference date for setting a price for the open offer.
Sebi had ordered the acquirer to pay an interest of 15% per annum to shareholders of Colour Chem for the delay in making the open offer. Interest would have to be paid for the period from 22 March 1998. The order was issued on 16 October 2002 and the open offer was urged to be made within 45 days of the date of the order.
Sebi said the acquirer had violated regulations 10,12 and 14 of the Takeover Code as it acquired 50.1% shares/voting rights and control in the target company without making a public announcement to acquire shares/voting rights or control in accordance with Regulation 13 of the Takeover Code.
Meanwhile, dealers recommend that investors should hold on the stock at the current levels and wait for the Supreme Court's decision over the SAT ruling on interest payment. They, however, caution against taking fresh positions in the stock.
As per Sebi's reference date of 21 November 1997, the open offer price comes to around Rs 318 per share. The interest payment of Rs 238.5 per share (for 5 years) would take the parent's total cost per share up to Rs 556.50, a premium of 152.9% over the current current levels.
Now, if the company buys 100 shares at the current price of Rs 220.05 per share and makes an open offer exclusive of the interest rates and all the shareholders participate in the open offer, then for every 100 shares with the shareholder, only 40 shares will be absorbed in the open offer and the rest will be returned.
It has been seen that after every open offer, the stock price crashes to its lower levels as punters and operators offload their position. The 52-week low of Colour Chem stock is Rs 116 per share on 26 March 2002. So one thing is sure: the share price will not slip below that level.
Therefore, if a shareholder sells the other 60 shares at the bottom, he will be at a loss as the amount received at that point will be below the amount at which he has bought.
For 100 shares at a price of Rs 200 per share, the holder will receive Rs 220.05. But if the shares are surrendered, in the open offer and, assuming that the share price drops to its 52-week low thereafter, then the shareholder will receive only Rs 19,680, thus losing on Rs 2,325 for every 100 shares he owns.
Colour Chem was incorporated in 1956 in technical and financial collaboration with Hoechst and Bayer AG and three Indian business groups - the Ruias, the Khataus and the Ghias.
In 1990, Bayer AG disinvested and Hoechst AG progressively increased its equity stake to 50.1% to make Colour Chem its subsidiary, representing its specialty chemicals division in India. Subsequent to the merger of the speciality chemicals division of Hoechst AG with Clariant AG in 1997, Colour Chem became a part of the global Clariant group. Colour Chem has a subsidiary, Vanavil Dyes & Chemicals in Cuddalore, Tamil Nadu.
Colour Chem is a manufacturer and merchant exporter of pigments, fine chemicals and leather chemicals and currently enjoys trading house status. In order to align the group more closely to the industries that it serves, the Clariant group has changed the nomenclature of some of its divisions. In line with this practice, the company also changed the names of the concerned local divisions from April 2000. The business structure of the company now comprises: life science and electronic chemicals, pigments and additives, textile, leather and paper chemicals, cellulose ethers and polymerisates and functional chemicals.
For the third quarter ended 31 December 2002, the company registered a massive rise in net profit to Rs 2.90 crore on a 19.2% growth in net sales to Rs 81.46 crore.
As on 31 December 2002, promoters held a 50.10% stake in the company, while the public and domestic institutions held 19.56% and 22.46%, respectively.
