Fairfax's open offer zooms IIFL by 8%

Shares of brokerage IIFL Holdings (formerly India Infoline) are up 8% at Rs. 203.25 per share, have receded from day’s high of Rs. 225.95 (which was also the new 52 week high made today). Traded quantity of 39.31 lakh shares on NSE is many-fold the 2 week average traded quantity of 1.2 lakh shares.  

Fairfax Group has made a (voluntary) open offer worth Rs. 1,621 crore to acquire upto 26% stake in IIFL Holdings at a cash price of Rs. 195 per share. Already holding 8.97% stake in the company, as of 31-3-15, if the offer is fully subscribed to, Fairfax Group’s holding in the company will increase to 34.97%, surpassing promoter’s holding of 29.77%, as of 31-3-15. The offer is at a premium of 3.6% to yesterday’s closing price of Rs. 188.30 on NSE.

As of 31-3-15, promoter holding in IIFL stood at 29.77% while institutions, excluding Fairfax, held 35.03%, leaving 35.2% as public float. Hence, depending upon how many institutional investors (Copthal, Carlyle, Deutsche, Merrill Lynch, Morgan Stanley, Bank Muscat among others) participate in the open offer, the acceptance ratio will vary significantly. Nevertheless, given the run-up in the share price, post the announcement, the open offer price is not too attractive to the retail shareholders.