Electrolux Kelvinator soared in early trades on huge buying support following reports that AB Electrolux, the company's parent, has planned an open offer to de-list the shares of its Indian arm from the bourses.
Within minutes of commencement of trading on the BSE, the scrip of the domestic appliances maker hit 20% upper limit of the circuit breaker at Rs 7.25, recording a volume of just 101 shares by 11:02 IST. At the time of writing this article, the outstanding purchases position in the stock was at 57,899 shares. On Friday, the stock had ended at its new 52-week low of Rs 6.05.
Today's rise in the Electrolux Kelvinator scrip was purely on reports that the company's MNC parent, AB Electrolux, has decided to de-list the equity shares of its Indian subsidiary from the bourses by making an open offer to the shareholders. It plans to acquire 100% stake in Electrolux Kelvinator.
As on 31 December 2002, promoters held 85.96% stake in Electrolux Kelvinator, while the public and institutions held 11.04% and 0.61% respectively.
Analysts said the main reason behind the foreign parent's decision to acquire total control of Electrolux Kelvinator is the cheap valuation of its stock. The stock is far below its face value of Rs 10 per share. In the last eight months, the stock lost 56% to its 52-week low of Rs 6.05 on 21 March 2003 from its 52-week high of Rs 13.75 on 8 July 2002.
However, the open offer may take place only if the proposed Rs 200 crore rights issue is under-subscribed and its allotment to the promoters take their holding beyond the 90% limit set under the takeover code.
If the parent has to make an open offer it has to keep the buy-back price at the same level as the rights issue price, which has been fixed at Rs 10, that is around 38% premium to the current market price.
The decision to make an open offer by AB Elecrolux follows the two options given by the Securities and Exchange Board of India as a precondition for allowing the company to go for a rights issue of equity shares. The options are either make an open offer to the existing shareholders after crossing the 90% limit or offload equity holding so that the non-promoters have at least 25% of the listed securities.
Electrolux Kelvinator, based in Delhi, manufactures refrigerators, washing machines, domestic dishwashers, air conditioners, vacuum cleaners, microwaves and other cooking equipment.
For the third quarter ended 31 December 2002, the company registered a net profit of Rs 9.36 crore, compared to a net loss of Rs 8.88 crore. Net sales increased by 159% to Rs 67.37 crore from Rs 26.01 crore in DQ 2001.
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