HOSTILE TAKEOVER: SMALL INVESTORS CONCERN

The upward movement of the Indian Stock Market is unabated; sometime it is scary as a small investor to be there, in front of the computer. Capitals of all forms and from all types of sources are entering in the market. It seems the flow will continue for some more times. The recent entry of some Pension indicates the robustness of Indian Stock Market. Some of these funds are well managed and proactive. They generally do not allow Corporate Houses to fiddle and they demand results. We are entering into a more matured stock market scenario in near future.

 

Hostile takeover in our market is virtually non existent, though it is a norm in developed markets. In many cases the hostile takeovers are welcomed by small investors, as they result in matured pricing of a stock.  Recently, there was a rumour of potential take over of Hindalco by a multinational corporation. It is scary not only for the small investors at this dizzy height but also to the corporate houses. The phenomena of hostile takeover will be reality in the coming years.  

 

The leading corporate houses are taking pre-emptive steps by increasing stakes in their companies. Though it is seen as to leverage the India growing story and exercise greater control in the companies; it will act as effective shield against hostile takeover too. I will furnish some figures in the table below which will tell stories if analyzed.

 

Corporate house	Company	Promoters holding % (June-07)	% increase in last one year
ADAG	Reliance Communication	66.75	24.52
ADAG	Reliance Capital	52.40	16.95
ADAG	Reliance Natural Resource	49.95	4.89
ADAG	Reliance Energy	35.90	30.90
Mukesh Ambani	Reliance Industries	50.98	1.15
Tatas	Tata Steel	33.77	6.89
Tatas	VSNL	76.24	4.72
Tatas	Indian Hotel	29.17	0.77
Tatas	Tata Tea	35.40	6.45
Tatas	TCS	79.12	-4.57
Bajaj	Bajaj Hindustan	40.90	3.19
Bajaj	Bajaj Auto	30.11	0.33
UB	United Spirit	38.10	1.78
OP Jindal	Jindal Stainless	42.56	1.98
OP Jindal	JSW Steel	46.43	1.28
Infosys	Infosys	16.54	-2.87
Satyam	Satyam	8.79	-0.39
Wipro	Wipro	79.58	-1.51
HCL	HCL Technologies	67.55	-1.75

 

The new equation of ownership may effect small investors, because in India the management and the promoters are same unlike other developed markets.

 

The increase in stake may dissuade potential take over premium of the stocks where the promoters are holding majority interest of the company. But at the same time the promoters will be at bay as they will always under pressure from those FIIs in addition to small investors best freind SEBI.

---

Get the freedom to save as many mails as you wish. Click here to know how.