FIs may agree to sell entire stake in MRL to Modis

Sitanshu Swain

Mumbai, July 15: In a complete turnaround of events in the ongoing Modi Rubber Ltd open offer drama, domestic financial institutions (FIs) led by the Industrial Development Bank of India (IDBI) may finally agree to sell their combined stake of 44 per cent in Modi Rubber Ltd (MRL) to the promoters.

An announcement to this effect is expected from the IDBI by Monday evening as the open offer by the Modis for MRL at Rs 90 per share is closing on the same day.

The new development, which the Modis have been waiting for quite some time, has been made possible after one of the MRL managing directors, B.K Modi met the chiefs of FIs on Saturday evening to sort out the stake sale wrangle following the decision by FIs not to participate in the open offer.

‘‘It is possible to sell the stakes to Modis as they have agreed to all our conditions,’’ said a top official of one of the financial institutions.
According to him, the FIs, which together hold 44 per cent of MRL, had put forth two conditions. First, a good price and offloading of their entire MRL stake. Secondly, dispose of their stake in favour of Modis.

‘‘Yesterday’s talk has been productive and we are working out the modalities to effect the transaction by which the entire FIs’ stake will be offloaded to the Modis,’’ added the top official.

However, it is yet to be confirmed whether the deal between FIs and Modis are being struck at Rs 90 per share. The FIs have pegged their expected price between Rs 110-Rs 120 for accepting the offer from the Modis and offloading their stake in the promoters’ favour.

Earlier, Mr BK Modi was hopeful of bringing about a consensus among the FIs to offload their stake in favour of promoter since the Modis had agreed to all their demands, even that of giving a bank guarantee.

The Modi’s planned meeting follows a terse statement by the IDBI on Saturday that FIs collectively have decided not to participate in the open offer.

“After much deliberations, it was decided to reiterate the earlier decision not to participate in the open offer,” IDBI Chief SK Chakrabarti said, adding that this had been their position all along and that the decision was taken at a meting of heads of FIs.

“Heads of FIs met this afternoon and reviewed the developments since July 2 in regard to the affairs of MRL and matters related thereto,” Mr Chakrabarti added.

Unhappy with the Modis’ initial offer of Rs 81.50, the institutions — IDBI, LIC, GIC and UTI — in an unprecedented development, had threatened to make a counter-offer to acquire a seven per cent stake from the market in a bid to take over the management of MRL.

The FIs, which have expressed displeasure over the functioning of MRL, intend either to exit the company at the right price or to replace the present management with a new management which can work towards increasing shareholder value. The consortium of VK Modi, BK Modi, Modi Fashions and Securities Pvt Ltd and Modikem Ltd, in concert with Witta International Inc and Sidh International, has revised the offer price upwards to Rs 90 per share to acquire up to 87,64,186 shares. HSBC Securities & Capital Markets (India) is the merchant banker for the Modis.