Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel https://t.me/InvestmentGuruIndia
Download Telegram App before Joining the Channel
Brookfield to acquire significant stake, triggering open offer
* INDOSTAR, in conjunction with the promoter, Indostar Capital Mauritius (ICM), has entered into an agreement with BVCP V Multiple Holdings and Brookfield Business Partners (together called “Brookfield”) to issue (a) 30.2m shares as preferential allotment to Brookfield at INR290/share and (b) 12.1m compulsory convertible preference shares (CCPS) at INR290/share. The CCPS carries a coupon of 10% p.a. and can be converted any time in the next 18 months into one equity share. The total subscription amount aggregates to INR12.25b.
* In addition, Brookfield will also buy shares from ICM in two tranches, (a) Tranche 1 – 5m shares at INR290/share and (b) up to 3m shares at INR290/share.
* Since the stake of Brookfield in the company on a fully diluted basis would exceed 25%, it has triggered a mandatory open offer to all public shareholders up to 37.2m shares at a price of INR290/share. Upon full acceptance of the open offer, the total investment by Brookfield in the open offer would be INR10.79b.
* Assuming full acceptance of the open offer, conversion of the CCPS and the Tranche 1 acquisition of 5m shares, Brookfield would end up owning 59.02% stake in the company.
* As a result, Brookfield will also become a co-promoter in the company and nominate two board members. Mr. Sridhar would continue to lead the company as Vice-Chairman and CEO.
Valuation and view
The entry of Brookfield as a co-promoter is a material development for the company. While the company is already well capitalized, the capital infusion (post CCPS conversion) would result in leverage (assets/equity) declining from 2.9x to 2.1x (pro-forma). We seek clarity from management on recent events, strategy changes, if any, etc. We look to revise our estimates and TP post interaction with management.
To Read Complete Report & Disclaimer Click Here
For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html SEBI Registration number is INH000000412
Above views are of the author and not of the website kindly read disclaimer