Sheths, Mahindra offer Rs 36 for Gesco share

MUMBAI, NOV 7: The Sheth group of Great Eastern Shipping and white knight Mahindra Realty & Infrastructure Developers Ltd (MRIDL) on T...

MUMBAI, NOV 7: The Sheth group of Great Eastern Shipping and white knight Mahindra Realty & Infrastructure Developers Ltd (MRIDL) on Tuesday agreed to make an offer to Gesco Corporation shareholders at a price of Rs 36 per share.

The offer is being made for 33.5 per cent of the equity capital of Gesco, which along with 11.5 per cent of the equity capital, currently held by the Sheth Group aggregates to 45 per cent of the Gesco. Gesco officials today filed documents with the Securities and Exchange Board of India on the counter price offer.

However, shareholders who have seen the Gesco share languishing at Rs 15 for a long time are waiting for further revision in the offer price. The counter offer comes in the wake of loss-making Mahindra Realty signing in an agreement here on Monday to ward off the hostile take over bid by the Delhi-based developer A H Dalmia of Renaissance Estates Ltd. The alliance was worked out by Housing Development Finance Corporation chairman Deepak Parekh, who brought the Mahindras and the Sheths together.

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Said an investor, “had the Sheths taken this keen interest earlier, the share price would not have suffered for a long time. It would have kept away takeover predators also. They never created any shareholder value all these years. Now they have discovered that the Gesco share is worth more.”

The Dalmias’ open offer for acquisition of Gesco’s 45 per cent equity capital at Rs 27 per share was scheduled to open on November 24. With the Sheths making a counter offer to the Dalmias’ offer, the latter is expected to revise his offer again by revising the offer price to match the Sheth-Mahindra offer. However, Dalmia group sources declined to comment on any revision of the offer price.

The acquisition cost for the Sheth-Mahindra combine would work out to around Rs 35 crore, which would be funded by a line of credit provided by HDFC. It is envisaged that after a successful counter offer, Mahindra Realty and the Sheth group would hold Gesco shares in a 3:2 ratio and the constitution of the board would also reflect this shareholding pattern.

White knight neck deep in losses
MUMBAI:The white knight which has come forward to help the Sheths in defending Gesco Corporation from Delhi-based Dalmias is reeling under heavy losses. Ironically, Mahindra Realty & Infrastructure Developers Ltd, the subsidiary of Mahindra & Mahindra, which has made a loss of Rs 17.85 crore for the year ended March 2000 will be creating “shareholder value” in Gesco along with the Sheths.

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In short, the M&M subsidiary which has accumulated losses of over Rs 25 crore will virtually control the company as part of the agreement. “The white knight itself is neck deep in losses. How will it add shareholder value and help Gesco…. it is to be seen,” said a shareholder.

The auditors of Mahindra Realty have also qualified its accounts for understating profits. “The loss for the year and debt balance in the profit and loss account carried forward are understated by Rs 246.85 lakh and would have been Rs 20.32 crore (for the fiscal ended March 2000) and Rs 27.51 crore (accumulated losses),” the auditors said.

Moreover, the company will have to shell out over Rs 70 crore towards repayment of various loans by March 31, 2001. This includes Rs 30 crore as secured loans and Rs 40.13 crore as unsecured loans.