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Has Temptation Foods opted out of the hostile takeover bid for basmati rice producer Kohinoor Foods? The Mumbai-based company, that is engaged in frozen food business, and had at one time held over 13% stake (along with promoter group firm) in Delhi-based Kohinoor Foods Limited (formerly Satnam Overseas), promoted by Aroras, has further brought down its holding in the company to just over 2.2% last week by selling shares in the open market.

It had been bringing down its stake gradually and, in particular, sold stake during July-September period last year. At the end of December 31 2009, Temptation Foods held 3.4% of Kohinoor Foods. This seems to suggest that Vinit Kumar-led Temptation has given up in its quest for acquiring Kohinoor.

But, the story is far from over. Temptation is now raising fresh capital through various channels including Rs 30 crore through a preferential allotment, rights issue (undisclosed amount) and a fresh issue (up to $200 million) which could either be in the form of overseas issue or a domestic institutional placement.

The preferential allotment is to be made to three investors including Bahrain-based international brokerage firm Taib Securities, India Max Investment Fund and HBS India Investment Mauritius, each subscribing to shares worth Rs 10 crore. The company has also taken approval to raise as much as $200 million (Rs 920 crore) through various alternative options including an overseas issue.

Temptation has not mentioned specifically for what purpose it is going to use these funds but, as per an interview in September, Temptation chief had indicated that even though it has sold shares of Kohinoor for treasury gains and had brought down holding substantially, it is still keen to pursue Kohinoor Foods.

"We still believe that Kohinoor is a great company; we still believe that at an appropriate time we would like to buy more of this stock," he told a television channel. In the same interview, he had also said, the management has been trying to consolidate earlier acquisitions and was going to fund new deals by getting fresh equity.

Given the move to raise fresh equity, Temptation could well be gearing up for another acquisition in India. Whether Kohinoor is in its immediate radar is anybody’s guess but considering Aroras hold around 36% in Kohinoor, there is always the possibility of Temptation reviving interest in the company. Incidentally, Taib Securities, that is now going to invest in Temptation, holds 2.5% in Kohinoor.

What is interesting is the equity holding of Temptation. The promoters hold just 18% stake of which half is pledged which makes it an even bigger target for a hostile takeover. But it is not known how much support the promoters have from corporate bodies and HNIs who own a large chunk of shares of the company.

Temptation had in 2007 acquired the marine foods business of FMCG major Hindustan Unilever besides Everfresh, the frozen food business of Chambal Fertilisers & Chemicals.

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