Wednesday, April 17, 2013


Fresenius Kabi! Rings a bell? It should, it was the first company that burst the bubble of MNC delisting hope story by opting for an offer for sale to reduce promoter stake. Basically, according to SEBI guidelines, promoters need to either cut stake to below 75% or delist the company. Fresenius Kabi had 90% promoter stake and was on top of the list of punters taking bets on top dollar delisting price.

Now take a look at the set of events. The stock first doubled from 85 in December 2011 to Rs 170 by April 2012 on hopes of deslisting. Then, the promoters opted for an OFS instead of delisting and the stock fell to Rs 80. The OFS took place at Rs 80 but what was interesting was that a large chunk of OFS was subscribed by 4 merchant bankers. RBS Merchant Bank subscribed 30.5 lakh shares, Macquarie bank 29.65 lakh shares, Morgan Stanley 25 lakh and Nomura another 23 lakh for a total of 1.08 crore shares.

Now this is not illegal, and at no point am I accusing any of the entities here but look at what the company is doing now. Its come out with a voluntary delisting offer with a floor price of Rs 130/share. I am not in the business of predicting these developments but if all these merchant bankers do tender at 130/share, that will go a long way in the company being delisted. Remember, with the current float of 19%, the company now only needs 9.5% stake to delist and keep in mind, it did an OFS of 9% to cut stake from 90% to 81%. Do the math here. Its far easier for company to accumulate 9.5% after having given 9% stake in an OFS to select entities than it was to garner 5% when the public float was 10%. And I won't be surprised if all those who were allotted shares in OFS actually do tender in delisting offer.

This stock was seen as undervalued at 180/share when delisting buzz was alive. Just imagine, what a daylight robbery it would be if indeed the promoters manage to delist the company at Rs 130/share. Is there anyone looking at the plight of minority shareholders? This is all being done within the law, but sometimes spirit of the law is ignored in just following the letter of the law.

My other fear is that once this delisting is through, this will provide perfect precedence to some other promoters on how to delist the company at throwaway prices.


  1. Hi Anju, this's Manish Bothra from

  2. Hi Anuj,

    I think they might internally be willing to pay higher price (but they are just giving the 130 price to arrest any sharp price run up). In delisting there are 2 things (discovered price and 50% float). Lot of MNC are willing to pay higher price but due to 50% float delisting were failing since the shareholding was very scattered. Also since they have to pay for just 10% public, price is not much issue. They seem to have a taken OFS route to first place the shares in proxy account, but they are equal aware that they will face serious investigations if the book is tendered at 130. (seem more like a work around for 50% float requirement). How many MNC delisting have been tendered at indicative price ? I think average is anywhere between 40-60% above that and I would assume they would mind paying that kind of premium, otherwise they know they would face investigation similar to INDIA SECURITIES delisting. (kept on hold for 17-18 months, post final tendering).

    An interesting case happened in EXEDY INDIA (not many people tracked that). There was an open offer and Indian promoter proxy intentionally kept some shares with him to help MNC promoter to delist at later stage. So equation was that there was only 6% float and proxy was holding approx 2%. (Taas Overseas was the entity name). Then once the RBB book opened, just few days prior to final tender they shifted shares from proxy account to other accounts. Also since they knew that since genuine public float was only 4% (6% - 2% proxy) they tendered at high price to generate additional public demand (discovered price at 350 Vs floor price 141). They accepted the price and it got delisting without any questions from any quarters.

    Moral of the story was that the foreign promoter was willing to pay some high price for few %age float left with the public (it hardly matters since you are paying high price for only small %age of shares), but he got around the float requirement throguh the proxy. Then he shifted the share before final tendering and since they paid a decent premium no one questioned the whole scheme. Had they tried to delist at near floor price of 141, lot of questions would have been raised.

    1. Hi,

      Fair point. Would like to discuss with you.


  3. Hi Anuj,

    You can drop me your contact on or alternatively you can tell me your email and i will drop you my contact number.

  4. Hi,
    I loved reading your blog a lot. I run a business blog where readers contribute. If you like the idea you can drop me a mail at and also look at this link for more details: .

  5. Should we hold Fresenius Kabhi or sell it in market ?

    I would prefer to tender in RBB process and hope to get 150 /160 as delisting price. Good products portfolio but absolutely investor unfriendly company.