Following a furore by GMM Pfaudler minority shareholders over the Offer For Sale (OFS) at a steep discount to market price, Managing Director Tarak Patel clarified that the promoter group--the Patel Family--had no plans to exit the company.

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Trading GMM Pfaudler shares have been frozen for the third consecutive session, with no buyers for the stock. The company had announced an OFS at Rs 3500 per share a few days back, which was 33 percent below the closing price for that day.

The stock had hit a record high of Rs 6900 in the second week of August, and has crashed 41 percent since then to Rs 4033.

Patel told CNBC-TV18 that the Patel group had sold barely 2 percent of its stake in the company, and that too to fund the acquisition of parent Pfaudler's stake in the company.

GMM Pfaudler is in the midst of a complex scheme of arrangement involving the acquisition of the parent company Pfaudler's stake in it. CNBC-TV18's Sonal Sachdev had argued that the restructuring could have been done in a far simpler manner. (Click here to read more)

A big of chunk of the shares in the OFS were from private equity player Deutsche Beteiligungs AG (DBAG), which owns Pfaudler Inc, Patel said.

Post the OFS, DBAG will hold roughly 30 percent stake in the company and the Patel family will hold around 22 percent.

Patel said there were no plans by both DBAG and the Patel family to sell any more shares for the next three years. Also, the Patel family would be looking to raise its stake in the company to around 30 percent over time, he said.

He said there was no reason for investors to panic as the fundamentals of the business remained strong. On the reason for pricing the OFS at a discount, Patel said the shares had to be offered at a price which would interest investors. He said "high quality" investors from the US will be investing in the company.

Interestingly, some investors borrowed around 74,000 shares of GMM Pfaudler from the Stock Lending and Borrowing window of NSE and short sold them just a few days before the company revealed the price of the OFS. This has raised eyebrows because there were no previous dealings in GMM shares in the SLB window.

When asked about it, Patel, that was for the SEBI to look into.

The acquisition of Pfaudler's stake is proposed to be done through GMM International, a new company to be set up in Luxemburg.

GMM Pfaudler will acquire 54 percent in the company (34.4 percent directly and 19.6 percent via its subsidiary Mavag AG).

The owner of Pfaudler Group, Pfaudler Inc (which is controlled by DBAG ) will retain 20 percent stake and the Indian promoters, Patel Family, will acquire 26 percent.

To fund the acquisition, GMM Pfaudler and its subsidiary will use internal accruals of $10 million and take on debt of $17.4 million.

First Published:Sept 24, 2020 2:53 PM IST