Sri Vishnu Cements

Recommendation: Accept

S. Vaidya Nathan

SHAREHOLDERS of Sri Vishnu Cements can accept the open offer at a price of Rs. 98.25, and tender their shares as this may be the last exit opportunity.

India Cements, Raasi Cement and ICL Securities are coming out with a second open offer for the shareholders of Sri Vishnu Cements.

This open offer follows the acquisition of a controlling stake by India Cements from the B.V. Raju group. The acquisition of the controlling stake was followed by an open offer in December 1999-January 2000. Further to this open offer, the shareholding of ICL Securities and persons acting in concert with it increased to 93.02 per cent in the equity of Sri Vishnu Cements.

Since beyond the 90 per cent threshold, the acquirer can go ahead with a delisting of the company, the open offer represents a good exit opportunity. On a standalone basis, the fundamentals of Sri Vishnu Cements may also not lead to a valuation comparable to the one on offer.

There is also the possibility of a merger with India Cements. In such an eventuality, shareholders of Sri Vishnu Cements may find the swap ratio not exactly in their favour. With the industry outlook also appearing more difficult than it seemed a year ago, shareholders of Sri Vishnu Cements may be better off accepting the open offer and cutting their exposures completely.

The lead manager is IL&FS Merchant Bank, the offer closes on May 26, 2000 and payment on acceptance/rejection would be completed by June 23, 2000 at the latest.