ALL has placed the highest bid of Rs 380 per share for acquiring the combined equity of Actis and the Burman family (a little over 43%) equity in PTL.
NEW DELHI: Ashok Leyland Ltd (ALL) appears to have emerged the winner in the race to acquire a stake of just over 43% in Punjab Tractors Ltd (PTL), beating tractor industry stalwarts Mahindra & Mahindra and Tafe in the process.
According to unconfirmed reports, ALL has placed the highest bid of Rs 380 per share for acquiring the combined equity of Actis and the Burman family (a little over 43%) equity in PTL.
If it does eventually manage to acquire the PTL stake, ALL will have to make a mandatory open offer of another 20% of PTL and would eventually become a majority shareholder of the company. An announcement on the PTL stake sale is expected shortly.
However, it is still not clear whether ALL has also managed to acquire the 14% stake PTL holds in group company Swaraj Mazda Ltd (SML) and the 33% stake in Swaraj Engines Ltd (SEL) through the bidding process.
Senior ALL officials acknowledged that bidding for PTL has been closed but declined to confirm whether their company has emerged the winner.
And if ALL has pipped M&M and Tafe to the post, how does it stand to gain? PTL has a strong brand equity in the tractor market, especially in the northern part of the country and ALL could enter the fast-growing tractor segment through this acquisition.
Then, the SML product portfolio of 5-10 ton LCVs could plug gaps in ALL’s existing LCV range. SML holds over 10% share in the LCV passenger carrier segment at present and this could be used by ALL to its own advantage.
However, the path ahead for ALL may not be all that easy. According to a recent J M Morgan Stanley research report, ALL would do well to hive off PTL’s tractor business and then exit it all together while hiking its stake in group company Swaraj Mazda.
“We believe the stock reaction would be positive for ALL if they clearly lay out their exit strategy from the tractor assets of PTL (worth about Rs 835 crore), ensure continuation of technical assistance with Isuzu Motors (in SML) and lay out an indicative time-frame for increasing their stake in SML,” Morgan said last week.
So, it remains to be seen whether ALL continues with tractors or uses only the LCV synergies through this acquisition. Yet another issue could make the entire transaction that much more difficult to complete: PTL’s equity holding in SML and SEL.
Each of these subsidiaries has a technological partner - Sumitomo Corp and Isuzu Motors of Japan for SML; Kirloskar Engine Oils for SEL - and any non-acceptance of the PTL buyout by these partners could bring trouble to ALL.
Already, PTL and Sumitomo Corp are fighting a bitter battle over the composition of the board of directors of SML and the matter is pending a decision by the Company Law Board. Any non-acceptance of PTL bidders’ offer by Sumitomo, for example, could make the entire buyout costlier and even lead to the absence of crucial technological inputs.
Meanwhile, the PTL scrip closed Rs 2.75 lower at Rs 314.40 on Tuesday. It has scaled the 52-week high of Rs 358.90 on February 8.
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