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Videocon promoters offer to buy shares in market

The Dhoot brothers, promoters of the Rs 25 billion Videocon group, will make an open offer of buying out 1.4 million shares of Videocon International Limited at an amount of Rs 256 million from next week.

The offer, to be open for one month, will help the small shareholders of VIL to sell their shares to the promoters and their associates at a price of Rs 140 per share, more than twice the current market price of VIL (Rs 65 per share).

Ruling out any takeover threat to the company, Videocon group chairman V N Dhoot said today that the current market price did not reflect the intrinsic value of the company and today's decision was aimed at meeting twin objectives of enhancing shareholder value and good corporate governance.

Dhoot announced that the promoters would continue the practice of acquiring an additional two per cent equity every year on an ongoing basis till they reach an absolute controlling interest of 51 per cent, subject to the rules and regulations of the Securities and Exchange Board of India from time to time. The promoters currently hold 35 per cent of the equity while the associates hold an additional 7.1 per cent.

Under the current takeover guidelines (1997), any acquirer, including promoters, can buy shares through open market transactions subject to a maximum of two per cent so long as their shareholding is between 10 to 51 per cent. An open offer is mandatory only if this limit is breached.

Explaining the rationale behind the pricing of share at Rs 140, Dhoot said the price was arrived at based on the valuation done by the statutory auditors taking into account market value, book value, and intangibles like sales, service and distribution network.

VIL has a shareholder base of over 1.2 million investors who collectively hold around 31 per cent of the equity capital followed by 10 per cent holding by financial institutions and 17 per cent by foreign institutional investors.

UNI