InGovern cautions shareholders against Triveni Engineering’s open offer for Sir Shadi Lal

InGovern Research Services, an independent corporate governance research and advisory firm, has raised red flags against Triveni Engineering & Industries’ (TEIL) open offer for Sir Shadi Lal Enterprises (SSLE), stating it is much likely to fail. This is because the market price of Rs 280 is much higher than the offer price of Rs 262.15 a share.

Further, raising concerns over the rationale and prudence of the investment by TEIL in SSLE, the proxy advisory firm has said that Triveni may face opposition in getting a controlling stake in SSLE. The deal might also “adversely” impact the former’s minority shareholders.

InGovern, in its note, also stated that the SSLE’s independent directors had also raised concerns on the valuation of SSLE, adding that the offer price was grossly under-priced. Guiding SSLE shareholders to be “cautious”, they had stated that the valuation was 366% higher at Rs 1,221.7 a share.

Earlier on January 30, TEIL had announced the acquisition of a 25.43% stake from a set of promoters of SSLE for Rs 262.15 a share for Rs 35 crore in cash, triggering an open offer. The open offer is yet to commence, pending a Sebi approval.

TIEL is part of a billion-dollar Triveni Group, an integrated sugar manufacturer with presence in engineering, power transmission, water and wastewater treatment solutions, and defence.

Prior to the acquisition, two sets of promoters jointly owned about 61% of the shares in SSLE. The managing director of SSLE, Rajat Lal, holds a 20.73% stake in the company individually and 36.34% collectively through relatives, who have not sold their shares to TEIL. Meanwhile, Vivek Viswanathan and family, who had previously owned around 25%, sold their shares.

TEIL may face opposition from various stakeholders of SSLE on giving it a controlling stake in the company, InGovern said.

According to InGovern, going forward, in case of differences between these two sets of SSLE shareholders, there is possibility of a potential deadlock. Apart from this being detrimental to the interest of all SSLE stakeholders, it may also impact the company’s special resolutions in the future.

On the date of the open offer announcement (January 30), SSLE’s share prices closed at Rs 156.80 on BSE, and on February 19, it peaked to Rs 383.30, while it closed at Rs 330 on April 4. The minority shareholders will find it hard to tender their shares through the open offer at the low offer price, InGovern said in its note.