Honeywell does a triple jump encore on the Indian bourses – Dheer Kothari

dheerdaNormally, Honeywell Automation India Limited (HAIL) stock (formerly Tata Honeywell) is as quiet as a sleepy little hamlet. Total shares traded are normally in the range of a couple of thousands at best. But in the last one month it has done, to borrow a term from athletic jargon, a ‘triple jump’ or a hop, step and jump!

In the last one month, the stock first did a triple jump over a period of three days between November 15 and 19, ostensibly on speculation that the company would opt for delisting from the exchanges which was promptly denied by the promoter company. During this period the scrip jumped on the BSE from Rs 2721 (vol-190 shares) on November 13 to Rs 2800 (vol-1423) on November 15 and Rs 2858 (vol-698) on November 16 before the final jump to Rs 3391 (intraday) and Rs 3315 (vol-116075 shares) at close (a spurt of almost 22 per cent in three sessions) in the next session on November 19!

Honeywell Asia Pacific Inc, promoter of HAIL, issued a clarification on November 19, in response to a news item on a leading news channel on delisting of the company which said: “The news item is clearly speculative and incorrect in nature and they have not accounted for the official statement from Honeywell.” The promoter company put to rest all speculation with another announcement on November 21 which clearly stated that it was required to increase its public shareholding to at least 25 per cent by June 3, 2013 as per the Securities Contract (Regulations) Rules, 1957. It added that Honeywell Asia intended to reduce its holding in HAIL, in due course, through an offer for sale in one or more tranches to comply with a Sebi circular dated July 18, 2012 which requires all listed companies to maintain a minimum public shareholding of 25 per cent within the stipulated time.

As expected, the stock began to lose steam as the real story unfolded. It took just two sessions (November 20 and 21) for the stock to crash to Rs 2503, a precipitous fall of nearly 25 per cent! So, in effect investors were treated to a roller-coaster ride in the span of a week, which I am sure must have left several investors feeling giddy at the end of it all.

The triple jump was repeated on December 17, 2012 when HAIL stock jumped by 16.25 per cent to close at Rs 2785.50 on BSE with a volume of 1.5 lakh shares. Again, between December 13 and December 17, the stock gained by over 18 per cent. What was the provocation this time round? Honeywell Asia announced on December 13 details of its offer for sale at a floor price of Rs 2150.

So what inferences can one draw from such price movements? This offer for sale has been cleverly designed to avoid frivolous bids from speculators as non-institutional bidders are required to deposit full order amount in cash with the stock exchanges. The company also reserves the right to cancel the offer for sale if it finds that the bids received are less than the quantity offered for sale (in this case-6.24 per cent of the equity capital or 5,51,333 shares). More importantly, 25 per cent of the offer for sale is reserved for mutual funds and insurance companies and there is a cap of 25 per cent on the allocation to individual bidders other than mutual funds and insurance companies. Clearly, interest in this offer for sale will be kept alive till the company achieves its objective of diluting its holding in HAIL to 75 per cent. Speculation, however,  is not entirely ruled out because the seller (Honeywell Asia) can sell the shares in one or more tranches and speculators stand to gain from volatility in the market price of the stock till the offer for sale is finally closed. Expect more action and reaction in this counter in the days ahead!