IVRCL denies hiring UBS, Essel's takeover dreams crumble

The war of words between infrastructure company IVRCL and the Essel group is turning more intense with every passing day. In the latest development in this growing spat, IVRCL's main promoter Sudhir Reddy, has threatened to take UBS to court if it did not deny the Essel group's assertion that it (UBS) had negotiated on behalf of IVRCL (as a merchant banker) to sell a stake to Essel, reports Economic Times.

ET quoted Reddy as saying, "The question of giving a mandate to a merchant banker comes only if we, the promoters, are interested in selling our stake. Moreover, why should I go with UBS with whom I have no business?"

The Essel Group, in turn, claimed that UBS had made a presentation containing details about IVRCL that could not have been obtained without a clear mandate from the company.

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Earlier this month, Subhash Chandra-owned Essel group started buying IVRCl shares from the open market, rapidly raising its stake to 12.3 percent. That was higher than the 11.2 percent owned by Reddy in IVRCL. Essel, however explained that it had only bought the shares because a merchant banker, whom they identified as UBS, approached the company and told it that IVRCL's promoters were interested in selling their stake.

But, IVRCL flatly denied such a move and even called the Essel group "liars." Since then, however, Essel has stopped buying any futher shares, which has confused the markets. If there was no intention of taking over IVRCL, why did it go to the trouble of buying so many shares so quickly?

Even IVRCL's shareholders have turned impatient. The stock surged on news of Essel's purchases: between 27 March and 13 April, when Essel was actively building its stake in IVRCL the stock jumped more than 20 percent.

Since then, with confusion reigning over what Essel's intentions are, the stock has slumped 18 percent. Until then, investors had been salivating over the prospects of a bidding war.

What happens next? It's difficult to say. With IVRCL in no mood to befriendEssel and UBS silent over the issue of whether it was acting in the role of merchant banker or not, it's tough to chart a path for the stock.

In any case, don't expect the drama surrounding the Essel-IVRCL hostile takeover saga to come to an end any time soon. The last word in this case has not been said yet.