InGovern warns investors about Triveni Engineering’s unsolicited bid for Sir Shadi Lal
Triveni Engineering & Industries’ (TEIL) open offer for Sir Shadi Lal Enterprises (SSLE) has drawn warning flags from InGovern Research Services, an independent corporate governance research and consultancy organization, indicating that it is very likely to fail. This is due to the fact that the offer price of Rs 262.15 per share is much lower than the market price of Rs 280.
Furthermore, the proxy advice firm has expressed doubts about the logic and wisdom of TEIL’s investment in SSLE and said that Triveni may encounter resistance in obtaining a majority position in the company. The minority shareholders of the former may also be “adversely” impacted by the sale.
In a note, InGovern said that the offer price was wildly undervalued and that the independent directors of SSLE had also voiced reservations about the company’s valuation. They had advised SSLE owners to exercise “caution” and said that the share price had increased by 366% to Rs 1,221.7.
On January 30, TEIL had previously said that it would initiate an open offer after purchasing a 25.43% share from a group of SSLE founders for Rs 35 crore in cash at a price of Rs 262.15 per share. The open offer has not yet started; Sebi permission is required.
TIEL is a component of the $1 billion Triveni Group, a comprehensive sugar producer with operations in power transmission, engineering, defense, water and wastewater treatment systems, and power transmission.
About 61% of SSLE’s shares were jointly held by two sets of promoters prior to the transaction. Rajat Lal, the managing director of SSLE, has a 20.73% individual ownership in the business and a 36.34% collective holding thanks to family members who haven’t sold their shares to TEIL. In the meanwhile, the family of Vivek Viswanathan, who had previously held around 25% of the shares, sold them.
According to InGovern, TEIL may encounter resistance from different SSLE stakeholders if it attempts to acquire a majority position in the business.
According to InGovern, there might potentially be an impasse in the future if there are disagreements between these two groups of SSLE shareholders. In addition to being against the best interests of all SSLE stakeholders, this might have an effect on the company’s future special resolutions.
The BSE closing price of SSLE’s shares on the day of the open offer announcement (January 30) was Rs 156.80. On February 19, the share price reached a height of Rs 383.30, and on April 4, it ended at Rs 330. According to InGovern’s remark, minority shareholders will have difficulty tendering their shares via the open offer at the low offer price.
