Reliance Capital Partners, a group firm of Reliance ADA group, has hiked its holding in Fame India to 7.6% through open market purchases since February 3, when Inox Leisure announced a deal to acquire Fame.

Although Inox has already reached a comfortable level by crossing the 50% mark in holding, Reliance ADAG has been making noises about circumvention of regulatory norms in the deal. It has also claimed that its offer for acquiring Fame at a higher price was spurned by Shroffs, the erstwhile promoters of Fame. With the continuing share purchase, Reliance ADAG has fueled rumours of a counter-offer to garner more shares in Fame.

As per VCCircle estimates, Reliance ADAG has spent close to Rs 13.27 crore to buy the shares at an average cost of acquisition of Rs 49.78/share. This is marginally below the open offer price of Rs 51 that Inox is looking to pay to buy 20% additional shares in Fame to create a clear number two player in the multiplex industry in the country. But this is much lower than Rs 80 that Reliance claimed it had offered to pay Shroffs to buy their 43% in Fame.

Fame India scrip is shooting up hitting upper circuit everyday and it touched Rs 61.6 at BSE after rising 4.94% (the maximum it can go in a day). At this price, Reliance is sitting on unrealised gains of 23.7% on its barely week-old investment.

Reliance ADA group that runs the country’s largest multiplex chain under the Big Cinemas brand through Reliance Mediaworks, has, in the meantime, raised questions on the transaction between Inox and Fame promoters saying the issue goes beyond just pricing of the deal, "Involving serious matters relating to suppression of material facts, violations of the SEBI Takeover code and SEBI Fraudulent & Unfair Trade Practices Regulations (FUTP). It is also about the fiduciary duties of promoters listed companies and the protection of the interests of minority shareholders."

In a statement, issued on Tuesday, it added that it has plans to bring all the relevant facts to the notice of all regulatory authorities including markets regulator SEBI, Ministry of Corporate Affairs, Reserve Bank of India, Income Tax and others for "such action, if any, as they deem ppropriate."

Incidentally, Reliance Capital, the public listed financial services firm of Reliance ADA group that held as much as 9% in Inox Leisure as of December 31, 2009, has sold almost half of the shares of the company in the open market in the last few weeks, (most of it in the last one week). As per latest disclosures Reliance Capital sold 1.6% of Inox on February 5, bringing down its holding to around 5.8%. Inox Leisure stock that dropped 4% to close at Rs 74.05 at NSE on Tuesday and after rising over 3% in intra-day trading closed at Rs 74 on Wednesday.

Although VCCircle is not privy to any information about the deal that Reliance apparently claims to have, the transaction does lead to a few questions on the pricing front. The Shroffs’ stake was acquired for around Rs 44/share. As against this, the open offer to shareholders is being made at Rs 51 a piece. Typically, promoters look to encash at least as much as an acquirer is going to pay the public, if not more (through a control premium or non compete fee). But, in this case, it happens to be 13.7% lower. Compare this with Reliance’s claims of offering Rs 80 a share to Shroffs.

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