Shares in Indian investment firm Dhir were a lot dearer on Tuesday morning after the company revealed it is considering a number of options to unlock the value in the company, including acceptance of a cash offer from company director Alok Dhir.
Acorn Global Investments, a company associated with the family members of Alok Dhir, a director of the company and of Shiva Consultants Private Limited, is offering 42p in cash for each share in Dhir India Investments (DII), in a deal which values DII at about £7m.
On the face of it, that seems a good deal, given that the day before the bid announcement shares in DII were languishing at a 52-week low of 15.25p.
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However, interim results released concurrently with the cash offer reveal that at the end of September the net asset value (NAV) per share of DII was 74p, and the company is exploring ways of realising the value from its investments.
The DII board has appointed accountancy firm PwC to advise on and execute both a process of divesting its special purpose vehicle (SPV) investments over a three to six month period and, if necessary, the appointment by the company of a replacement Investment Manager to Shiva Consultants Private Limited.
Additionally, the company has retained a law firm to execute the legal process that should result in the repatriation of unused cash held in the Indian SPVs. "We understand that this process should take up to 9 months and may result in up to approximately £3 million being repatriated, a proportion of which may be available for distribution to shareholders," the company statement said.
The company is also contemplating delisting from AIM during the realisation process, as a means of saving costs.
In the view of Acorn, however, there are likely to be very few opportunities to dispose of assets over a three to six month period. "In any event, such sales would, in all likelihood, be at distressed prices and are likely to fall far short of the values attributed to them in the half year results to 30 September 2011," the bid announcement said.
Investment company DII was formed in 2007 for the purpose of investing in distressed assets in the then burgeoning non-performing assets (NPAs) market in India.
The hope was that the introduction of the SARFAESI Act in India in 2002 would lead to the speedy resolution and recovery from Indian NPAs by providing lenders with a mechanism for restructuring distressed companies without court intervention, the statement from DII explained. The terms "speedy resolution" and "India" rarely appear together in a sentence, however, and the benefits expected to emerge from the SARFAESI Act have not materialised and recoveries from NPAs have generally remained enmeshed in court processes, resulting in significant delays in the resolution and recovery process.
The shares of DII shot up by 19.25p to 34.5p on the bid announcement.
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