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SSI has been frozen in a 5% circuit since morning. Kalpathi S Suresh Chairman & CEO, SSI India says that they are retaining a residual of holding of about 20% that they would continue to hold but as a minority shareholder.
Kalpathi S Suresh Chairman & CEO, SSI India says that they are retaining a residual holding of about 20% and that they will continue to hold it as a minority shareholder. He further adds that they would be the sitting management control to the new promoter group that is coming in.
Excerpts from CNBC-TV18's exclusive interview with Kalpathi Suresh:
Q: What is the plan exactly? Is this gentleman making an offer for your entire stake?
A: We own about 71% in the company, through an earlier sale of 13.5% and through an SPA that he has signed yesterday; we are together as promoters selling 51% of the company. We are retaining a residual of holding of about 20% that we probably would continue to hold but as a minority shareholder. We are a sitting management control to the new promoter group that is coming in; the pricing as we have set is at Rs 208 and given that it has gone over the limits set for takeover, I expect them to make an open offer at Rs 208 or above in the next couple of days.
Q: Rs 208 per share for your 51% and an open offer at Rs 208 for 20% of the equity? What is the float? Is it 30%? Is their entire non-promoter holding a float, or do you have any other entities owning any of that remaining 30% in the company?
A: We own about 71% - between Reliance Capital , Morgan Stanley, Blackstone and maybe an asset out of Singapore; we have placed stocks with them in January of last year in a preferential offer which sort of just came out of lock in last week. So they own about 14-15% of the stock. Couple of others own another 3-4%, so our guess is about 10-11% is public float, about 18-19% with institutions and about 71% with us.
Q: Any idea of what the financial institutions plan to do and whether they will tender at this price?
A: I think that it is an offer at which considering we have placed the stock a year ago at about Rs 105, it gives them close to 100% returns in the twelve months that has just passed and being an open offer they get the volume that it can take. Having said that I have seen the plans where the new promotive group has got is part of the reason why we have insistent on the residual holding that we are keeping at 20%. To my guess is, there might be part of it that could get tendered in probably they would hold back quite a bit.
Q: How keen is the new promoter on picking up additional stakes from the open market? Is there any chance of this open offer price being revised?
A: I do not know. You would have to talk to them.
Q: Why are you selling out?
A: I see this becoming part of a larger hole, I have seen some clients that are multifold bigger than what we already have, so expect it in the long run to create significant value, if their plans are in the process of getting closed, it should probably propel them into the top ten in the Indian market and I guess that will create the value that the stock can generate, given where the market is today.
Q: What is your total landbank and the cash flow potential for the next three to five years that you would planning to develop that land?
A: The landbank that we had was about close to 120 acres of land, all of it is in Chennai and quite a few of our properties are in the city. One of the properties that we are planning to put together is a 4,000 apartment complex with the roll out of about 1000 apartments per year and that would mean a cash flow anywhere between Rs 450-500 crore of revenue just on their one project and this is just for SSI itself.
Profitability on this project as we have put it was between 25-30%, so one was looking at free cash flows of about Rs 140-150 crore per year on this one project alone.
Q: What exactly is the plan for the new management, do they plan to put in a lot more cash or even look at option of delisting this stock?
A: I did not get the sense of delist that was happening, I think there is a merger of a much larger entity that is going to happen into SSI and that is part of the reason why we are insistent on a 20% residual holding that we wanted to keep with the family. The landbank that were brought in is multifold bigger than what we already have in SSI and that is part of the reason why we looked at this transaction very closely and finally agreed to sign it yesterday night.
Q: What is the track record of this NRI gentleman, who is picking up the stake right now, is he involved or has he been involved in a real estate business?
A: No, I think that the biggest track record that we saw was the ability to spot, negotiate and close very large distress properties, one of them is already half closed and that itself is much larger than the landbank with this size itself, so I think that it is a big plus. Number two, there is a strategy that was based on working closely with some of the best developers in the country through joint development agreements and to an extent, in my view that took away the risk of the development background not being there, if they are ready to join development with some of the best in the country now.
Q: Who is this guy?
A: The name is Prasad Potluir, the name of the company that bought the shares is PVP Enterprises, this is registered in Hyderabad.
Q: You two are not related, are you?
A: No, not at all.
Tags: SSI, Kalpathi Suresh , Reliance Capital, Morgan Stanley, Blackstone, Singapore, Prasad Potluir, PVP Enterprises
May 18 2013, 17:26
- in MARKET OUTLOOK
May 17 2013, 12:39
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