RELIANCE CAPITAL SCALE

Reliance Capital scales up stake in Fame to 11%
Aminah Sheikh/Mumbai - Feb 18,2010 00:26 AM
The Anil Ambani-promoted Reliance Capital has scaled up its stake in theatre chain Fame India from 8.13 per cent to nearly 11 per cent. This is subsequent to the demand from the Ambani group company, Reliance MediaWorks, for an explanation from Fame for spurning its takeover suit in favour of rival, INOX Leisure.
Reliance Capital began with a 3.5 per cent stake in Fame India and had been continuously shoring up its stake. However, INOX has already taken a 51 per cent stake in the company and announced an open offer for a further 20 per cent.
Reliance Capital's acquisition has been made at share prices between Rs 44 and Rs 75. Fame's stock closed at Rs 75 today, five per cent up from yesterday's close. This makes Fame five times costlier than its peers in the multiplex industry, based on its price to earnings (PE) ratio. For example, while Fame's PE is 97.79 based on today's price, that of Cinemax and Inox Leisure are 14.53 and 18.76, respectively.
Reliance MediaWorks claimed to have expressed interest in acquiring stake in Fame India at Rs 80 per share, though Fame had said earlier it did not get any formal written offer. Analysts said with INOX already having 51 per cent stake, the scaling up of stake could be Reliance MediaWorks' attempt to make the deal more expensive for INOX.
It is not known whether INOX will increase its open offer price (Rs 51 a share), but sources close to the deal say it may not, as it already has 51 per cent in Fame. The open offer is scheduled in April.
Analysts said if Reliance MediaWorks could increase its stake in the company to 26 per cent through open market operations or an open offer (which would be triggered if they increased it to 15 per cent), the company would secure a position on the board.
Reliance MediaWorks has been crying foul in the last few weeks, claiming it had made an offer to Fame's promoter, Shravan Shroff, to acquire stake at Rs 80 per share and threatened regulatory action against Fame India. However, in an earlier interview to Business Standard, Shroff had clarified, "Reliance MediaWorks never made a written offer to acquire stake in Fame at Rs 80.&"

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