Minda Corp’s 15% Acquisition of Pricol – Is it a Hostile Takeover?

The Indian stock markets have been buzzing for the past few days due to the storm created by the Hindenburg report on Adani shares. The latest headline-grabbing news is the 15.7% acquisition by Minda Corp in Pricol Limited, which has not only surprised the market but also the promoters of Pricol Limited. 

Get all the details related to this acquisition here.

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What are the details of Minda Corp’s acquisition of Pricol?

On Friday 17th February 2023, Minda Corp announced that it has acquired a 15.7% stake to the tune of Rs. 400 crores in Pricol Limited. This represents 1,91,40,342 equity shares of the total outstanding equity shares of the paid-up capital of the company. This acquisition was done through an open market purchase at an average purchase price of Rs. 208.9 per share and is said to be completed through the reverse book-building process. 

The company does not have any prior stake in Pricol Limited and the current acquisition is below the SEBI rule of 25% to attract open offer provisions. Therefore, there will be no consequence of the open offer that we have seen in the case of the Adani Group’s takeover of NDTV. 

What are the key financial details of Pricol?

Pricol Limited is a leading player in the auto components industry, specializing in the manufacturing of precision-engineered products. Founded in 2011, the company has achieved great success and recently became net debt-free through the consistent efforts of its promoters. With strong customer backing and a commitment to innovation, Pricol Limited is investing heavily in cutting-edge products and technologies to maintain its market leadership. 

Pricol Limited has reported a consolidated turnover of Rs. 1535 crores as per the audited financial statements for the year ended 31st March 2022. The current promoter share in the company stands at a little over approximately 37% and the shares of the company were trading at 52-week high prior to this announcement of the acquisition. The company has a PE ratio of 21.67 and an ROE of approximately 10% as of March 22.

Does the acquisition result in a hostile takeover?

Minda Corp acquired 15.7% of Pricol Limited through the open market purchase of shares making this a hostile takeover. Minda Corp is now the second largest stakeholder in Pricol Limited post the acquisition. The latter, however, had no information about the said acquisition and were left in a rude shock demanding the stock exchange to get an urgent clarification about the news shared by Minda Corp. The promoter group reiterated that they have no intention of a secondary sale of the promoter stake and that they stand committed to the company and its growth. 

Pricol MD Mr. Vikram Mohan said that they have no plans of raising any capital to meet their financial needs as the company has strong fundaments and a sound growth trajectory as well as no immediate plans to raise their stake in the company through the purchase of shares from the open market. 

What is the impact of this acquisition?

Minda Corp had earlier approached Pricol Limited for a stake in the latter but the latter had denied the offer. This acquisition by Minda Corp is therefore seen as hostile and may lead to friction between the two significant stakeholders in Pricol Limited. Pricol Limited MD Mr. Vikram Mohan has however said that they will avoid the case of a hostile takeover and may come up with a counteroffer at a suitable time. Minda Corp has mentioned that their investment in Pricol Limited was merely a financial investment without any special rights or benefits except that available to equity shareholders.

Pricol Limited and Minda Corp are competitors in the auto components manufacturing industry being the second largest player after Pricol Limited. After gaining a stake in Pricol, Minda Corp may be able to gain further consolidation in their market share which would be detrimental to the business of the former. The shares of both Pricol Limited and Minda Corp saw a decline of approximately 4% and 1.5% respectively post the news of the acquisition. 

Conclusion

Minda Corp’s acquisition of shares of Pricol Limited was an open market transaction which meant that there was no need to take any prior approvals from the market regulators or any information to be provided to Pricol. In his own words, Pricol MD Mr. Vikram Mohan has said that the news of the acquisition was a ‘bolt out of the blue’ and they are firm in not selling any further stake from the family to Minda Corp. They have also urged other stakeholders from refraining to do so.

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