UTI snubs Reliance's offer for BSES

UTI snubs Reliance's offer for BSES

July, 17: Reliance Industries Ltd's open offer for electricity firm BSES Ltd is unlikely to achieve full success after a key institutional shareholder said it had not subscribed to the offer.

The UTI chairman had previously said the offer price of Rs 255 was low. BSES shares hit a calendar 2000 high of Rs 392 in early March and have touched Rs 328 since Reliance made its bid in May."

If fully subscribed to, the offer would have raised Reliance's shareholding to 35 per cent from about 15 per cent now. UTI holds about 12 per cent of BSES's shares and, together with state-owned General Insurance Corporation (GIC) and Life Insurance Corporation (LIC), has about 35 per cent in the firm.

Their participation in the offer was seen as crucial to its success. GIC and LIC officials could not be reached for comment but sources said even they had not subscribed to the offer.

Details of the exact subscription to the offer are expected to be available later in the day. Besides the institutions, 19 per cent of BSES shares are owned by holders of the firm's global depository receipts (GDR), 15 per cent by foreign funds and expatriate Indians, three per cent by domestic banks and 15 per cent by others including retail shareholders.

Industry sources said the offer might attract subscription from small, individual investors which could raise its stake by five per cent. A Reliance spokesman declined to comment on the UTI announcement but analysts said Reliance could eventually gain control of BSES as it could even now gradually raise its stake through open market purchases.

Under Indian takeover rules, Reliance can acquire up to five per cent a year without the need for another open offer. "They may get about five per cent, which is good enough for them," said a Milind Karmarkar, Head of Research at Dalal & Broacha Stockbroking Pvt Ltd.

BSES shares were up by Rs 6.20 at Rs 254 while Reliance gained Rs 2.85 to Rs 362.75 in Monday morning trades in a weak overall market. The main Bombay index was down 1.03 per cent.