ITC Arm Beats Bright Star For AP Govt Stake In VST

Hyderabad/Kolkata, Aug 29: | Updated: Aug 30 2003, 05:30am hrs
Its a dream come true for Indian tobacco major ITC Ltd, as its investment arm Russell Credit Ltd (RCL) has outsmarted its nearest bidder as well as bete noire Bright Star Investments of Damani Brothers for the Andhra Pradesh governments 4.69% (7,23,499 shares) stake in VST Industries Ltd.

RCL has quoted Rs 215 per share, aggregating Rs 15.55 crore, as against Bright Stars Rs 172 per share, aggregating Rs 12.44 crore. The other two bidders, including LIC and CD Equisearch of Kolkata, have quoted Rs 165 and Rs 160.05 per share respectively. In a months time, VST Industries share price has jumped over 40 per cent, from Rs 130 during the last week of July to Rs 184 on Thursday (August 29). The Cabinet sub-committee will meet on September 4 to take stock of the situation and formally make announcement on the selection of the top bidder, DK Panwar, chairman of Implementation Secretariat, told the media immediately after the bids were opened.

RCL already holds close to 10.5 per cent in VST Industries and with the fresh acquisition of 4.69 per cent stake from the AP government, the overall holding in VST would rise to 15.2%.

This would trigger the takeover code of SEBI, and therefore, the company has to make an open offer for an additional 20 per cent to the existing shareholders.

Though, British American Tobacco plc (BAT) has not evinced any interest in the bids as it has no requisite clearance from FIPB, the source said that it has fully backed ITC arms bid for the stake.

After the open offer, Russell Credit will hold over 35 per cent stake in VST Industries, outstripping its parent BAT, which is holding about 33 per cent in the company. Interestingly, another major cigarette manufacture, Godfrey Phillips, though had shown keen interest in participating in the bidding process, has not submitted its bid.

BAT on Friday declined to comment on the successful bid by ITC Ltd for the AP governments stake in VST.

We are not commenting on this, BATs spokeswoman in London told FE over the phone. For any comment, you should go to ITC, she said.

While BAT runs VST by virtue of being the single-largest shareholder, ITC is run by a professional Indian management.

Russell Credit, which holds the VST stake, said the increase is purely strategic.

Russell Credits spokesperson said it has no plans to increase its holding beyond 15 per cent, the level that will trigger an open offer.

The question does not arise we had made an open offer earlier, Sudip Bandyopadhyay, a director of Russell Credit Ltd, said.

We are strategic investors, and we will continue holding the stake, he said.

Mr Bandyopadhyay said Russells bid had been the highest, way above the government-set reserve price of Rs 205, and the bids of the other three rivals.

Life Insurance Corp had bid Rs 165 and the CD Desai combine Rs 160.05. Bright Star already holds a 19.70 per cent stake.

Analysts said that BAT would find it tough to move special resolutions at VST because of Russells increased stake, combined with that of the Indian financial institutions.