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Wednesday, Apr 13, 2005

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Open offers fail to click as market prices rule higher

Virendra Verma

Mumbai , April 12

THE recent buoyancy in the stock markets does not seem to augur well for open offers.

Some of the open offers made by companies have not evoked good response from shareholders primarily because the market price has been ruling above the offer price.

This trend is also evident in offers that are yet to open.

Some of the recent offers in which the market price is ruling higher than the open offer price are Everest Industries, Alstom Ltd, and SKF India.

Even in the case of rating firm Crisil, the market price quoted higher than the original offer price until the end of last week. Last week, Areva T&DSA made an open offer for Alstom shares at Rs 75.03 per share for 20 per cent stake.

The stock price of Alstom jumped up above the offer price following this announcement. In the last one week, the stock has gained 84 per cent and is now trading at Rs 131.15.

The SKF group, in a bid to delist the shares of SKF India, had announced the floor price of Rs 153 per share in mid-March 2005.

The share price of SKF India declined marginally initially but is now trading at Rs 199.

In the case of Everest Industries, after the announcement of open offer by Adani Port at Rs 147, the stock price has ruled over this price and even after the closure of the offer it is trading at Rs 173.

Brokers and analysts don't find this trend uncommon as they feel that the investors in the stock market have become more intelligent and know the value of the shares they hold or buy or sell.

"There can be various factors for stock price ruling over the offer prices. It could be that the offer price or the floor price is lower than the fair price," said Mr Arun Kejriwal, an investment strategist with Angel Broking.

He added that several investors buy shares at price over the offer price in anticipation that the stock price will go up or that the offer price will be hiked; in case the price does not rise they can easily tender the shares at the open offer price. "Investors feel that the stocks are undervalued," said Mr Nikhil Thacker, Assistant Vice-President (Research), Asit C Mehta Investment Intermediates.

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