A joint open offer by promoters of Shree Renuka Sugars Ltd (SRSL) and its new foreign owner, Wilmar International (WIL) of Singapore, has floundered as the market price remained around 25% above the open offer price of Rs 21.89.
As central government hiked sugar import duty and gave an export subsidy on Monday, SRSL's shares, along with other sugar stocks, surged 10.3% further to close at Rs 29.40.
Officials closely watching SRSL's open offer told dna that the offer that closed last Friday managed to draw little response from shareholders.
On June 2, dna reported that the higher stock price was going to play a spoilsport in the open offer.
"This is a classic case of how one could make a mockery of the existing rules," said a stock market official. As per guidelines by the stock market regulator Sebi, it is mandatory for Wilmar and the Indian promoters – the Murkumbi family-- to make an open offer for buying up to 26% of the expanded equity share capital of the company.
Standard Chartered Bank, which acted as financial adviser to the deal between SRSL promoters and Wilmar, also managed the open offer.
The promoters are now going to focus on the rights issue, which is the third stage in the deal. Both will invest equally, and also subscribe to the unsubscribed portion of retail investors. According to the original plan, Wilmar and the existing promoters of SRSL would jointly participate in the rights issue to raise up to Rs 725.40 crore of primary equity capital for SRSL.
Officials close to SRSL said the company's next move will be to buy out minority shareholders in its Brazilian subsidiary, Renuka do Brasil, formerly Equipav, which SRSL took over in 2010. SRSL holds 59.4% stake in Renuka do Brasil as of now. It also acquired 100% stake in Renuka Vale do Ivai, another sugar major in Brazil.
"After a bad phase of drought and drop in production, the two companies in Brazil are back on track now. The future of SRSL's Brazilian subsidiaries will, however, depend on Wilmar's plans," said one of the officials.