ABB plans Rs 4,400-cr buyback offer to raise stake

ABB, a global power and automation technology group, will offer shareholders of ABB Ltd, its listed subsidiary in India, Rs 900 per share to increase stake in the company to 75 per cent from the present 52.1 per cent.

The aim is to facilitate the long-term development of ABB's business in the country, the company said in a filing today.

The parent company hopes to buy back 48.51 million shares of ABB Ltd, which when fully accepted will see ABB paying out close to Rs 4,400 crore (Rs 44 billion) to increase its shareholding to 75 per cent.

At present, ABB Group holds 97.8 million shares of its Indian subsidiary. ABB further said it had no plan to delist the Indian arm in the near future.

The offer represents a premium of approximately 34 per cent of Friday's closing price and 14 per cent over the mandatory floor price required under Indian regulations.

ABB Ltd stock on the National Stock Exchange surged 22.67 per cent in the wake of this open offer and closed at Rs 829.05 per share on Monday, when the Nifty benchmark index dropped nearly three-fourth of a per cent. Subject to regulatory clearance, the offer is expected to begin on July 8 and end on July 27.

Payment for the shares is expected to take place on August 10, the filing said.

ABB Ltd during the past year faced some tough conditions, as major buyers of its power equipment deferred or cancelled orders. The company was also hit severely by increased credit risk and its decision to exit the rural electrification business.

It posted a drop of 91 per cent in its net profit to Rs 6.6 crore (Rs 66 million) during the first quarter of 2010, having had to cope with foreign exchange losses and cost over-runs in some of the projects.

Revenue of the company, however, saw a marginal rise of 4.5 per cent to Rs 1,455.8 crore (Rs 14.55 billion) during this period.

The order book of the company also showed strain, with a drop of 26 per cent to Rs 1,688.7 crore (Rs 16.88 billion) in the first quarter of this calendar year.

By the end of March, the order backlog for the company was at Rs 8,753.50 crore (Rs 87.53 billion), a 24 per cent rise over last year.

On the basis of a full year of 2009, ABB Ltd posted a net profit of Rs 354.63 crore (Rs 3.54 billion), a 35 per cent drop over the corresponding period last year. Revenue of the company during this period stood at Rs 6,237 crore (Rs 62.37 billion), an 8.7 per cent drop over the same period last year.