NDTV Profit

Will Vijay Mallya's MCF go the United Spirits way?


Vijay Mallya seems to have another battle on his hands. Not done with Kingfisher troubles yet, there is now speculation that another UB Group firm - Mangalore Chemicals and Fertilisers - is trying to fend off a hostile takeover bid. (Track stock)

With a market cap of around Rs 650 crore, Mangalore Chemicals and Fertilisers or MCF is considerably smaller than the other group company United Spirits, which has a market cap of Rs 33,000 crore. However, after a rival became the largest stakeholder, MCF may be heading the United Spirits way as far as management control is concerned.

Pune-based Deepak Fertilisers & Petrochemicals acquired a 24.46 per cent stake in Mangalore Chemicals and Fertilisers on Wednesday. The acquisition has relegated current promoters - the UB Group - to being the second largest shareholder in MCF with 22 per cent stake.

Another 10 per cent in Mangalore Chemicals and Fertilisers is owned by Zuari Fertilisers, acquired in April this year. Nearly, 9 per cent stake in the company is held by domestic institutional investors, according to data on the Bombay Stock Exchange.

The speculation of a hostile takeover has arisen because nearly 13 per cent of UB Group's 22 per cent stake in MCF is pledged with banks.

MCF''s management told NDTV that there was no question of a bidding war or hostile takeover for management control.

"There will be no bidding war as far as I see. What Deepak has done is to acquire shares from 3-4 large mutual funds and investment companies, who have sold out at more than adequate returns," Deepak Anand, managing director of Mangalore Chemicals and Fertilisers told NDTV today.

However, analysts disagree. Independent market analyst Sanjeev Bhasin told NDTV that Deepak Fertilisers will definitely go for the kill.

"After Vijay Mallya lost his crown jewel - United Spirits - to Diageo, other companies of his UB Group are also likely to meet the same fate," Mr Bhasin said. Global drinks major Diageo is beginning to implement its own operational and governance standards at United Spirits after buying a 25 per cent stake in the company.

Deepak Fertilisers, which acquired nearly 2.89 crore equity shares in MCF for around Rs 180 crore on Wednesday, can take control of MCF by increasing its stake to 25 per cent, which will automatically trigger an open-offer under Sebi (Securities and Exchange Board of India) norms.

However, Mr Anand downplayed the possibility of such a scenario saying he will not speculate on the motive of existing shareholders.

"May be Deepak and Zuari think this is a good strategic fit for their existing businesses," he added.

In saying so, Mr Anand only repeated what Deepak Fertilisers said in a statement to the Bombay Stock Exchange on Wednesday.

What Mr Anand did accept, however, was the fact that the current management had been taken by surprise.

"Whatever I have heard is what I've seen on the news...It's been too sudden," he said.

Mr Anand also accepted that he has not been approached by Deepak Fertilisers so far in a clear indication that there might be more to the matter than one rival seeing "value" in its competitor.

Unless Deepak or Zuari clarify their stance, there's little hope that the takeover buzz will be quelled soon.

ALSO READ Banks Air Concern On RBI Credit Rules To Large Borrowers