Shipbuilder Bharati Shipyard will make an open offer to acquire 20 percent in offshore services firm Great Offshore to consolidate its investment in the firm, it said on Sunday.
Bharati, which already holds 14.9 percent in Great Offshore, will acquire the shares through its unit, Natural Power Ventures Pvt Ltd, it said in a statement on Sunday.
"This acquisition would provide enhanced stability to the existing management in Great Offshore and maximise shareholer value for both companies," Managing Director P.C. Kapoor said in a company release.
In June 2007, Great Offshore promoter Vijay Sheth had pledged his entire 15.5 percent stake with IL&FS and Motilal Oswal, who started to seek margin money following a plunge in the value of shares pledged by Sheth, according to media reports.
This prompted Sheth to borrow from Bharati, with whom Great Offshore had placed some vessel orders.Founders of Great Eastern Shipping , of which Great Offshore is a demerged entity, currently holds about 5 percent stake in the offshore services firm.
Vijay Sheth, on Saturday, stepped down as vice-chairman and managing director of Great Offshore while Soli Engineer has been appointed the chief operating officer, its spokesman told Reuters on Monday.
Bharati Shipyard has about $230 million worth of orders from Great Offshore including a rig, which was due for delivery in May but got delayed due to payment defaults and other reasons, and a multi-purpose supply vessel to be delivered in September.
Brokerage Emkay, which has a 'sell' rating on Bharati had said earlier in May the open offer will be detrimental to the company in the medium term as "the core business has serious headwinds with downside risk to earnings and cashflows."
There was also a high probability of negative cashflows in FY12, the report issued on May 8 said, adding "the transaction provides marginal upside to valuations of BSL in the short term, as the transaction is debt funded."
KR Choksey, which has a 'hold' rating on both Bharati and Great Offhsore, expects the shipbuilder's earnings per share to fall by 12.4 per share due to incremental interest cost.
Shares in Bharati Shipyard have soared over 59 percent since it acquired Great Offshore shares on May 7 while the latter has risen 23 percent. The CNX Midcap index .CNXMDCP has risen 31 percent in the period.
Bharati, which already holds 14.9 percent in Great Offshore, will acquire the shares through its unit, Natural Power Ventures Pvt Ltd, it said in a statement on Sunday.
"This acquisition would provide enhanced stability to the existing management in Great Offshore and maximise shareholer value for both companies," Managing Director P.C. Kapoor said in a company release.
In June 2007, Great Offshore promoter Vijay Sheth had pledged his entire 15.5 percent stake with IL&FS and Motilal Oswal, who started to seek margin money following a plunge in the value of shares pledged by Sheth, according to media reports.
This prompted Sheth to borrow from Bharati, with whom Great Offshore had placed some vessel orders.Founders of Great Eastern Shipping , of which Great Offshore is a demerged entity, currently holds about 5 percent stake in the offshore services firm.
Vijay Sheth, on Saturday, stepped down as vice-chairman and managing director of Great Offshore while Soli Engineer has been appointed the chief operating officer, its spokesman told Reuters on Monday.
Bharati Shipyard has about $230 million worth of orders from Great Offshore including a rig, which was due for delivery in May but got delayed due to payment defaults and other reasons, and a multi-purpose supply vessel to be delivered in September.
Brokerage Emkay, which has a 'sell' rating on Bharati had said earlier in May the open offer will be detrimental to the company in the medium term as "the core business has serious headwinds with downside risk to earnings and cashflows."
There was also a high probability of negative cashflows in FY12, the report issued on May 8 said, adding "the transaction provides marginal upside to valuations of BSL in the short term, as the transaction is debt funded."
KR Choksey, which has a 'hold' rating on both Bharati and Great Offhsore, expects the shipbuilder's earnings per share to fall by 12.4 per share due to incremental interest cost.
Shares in Bharati Shipyard have soared over 59 percent since it acquired Great Offshore shares on May 7 while the latter has risen 23 percent. The CNX Midcap index .CNXMDCP has risen 31 percent in the period.