Is the Torrent group exiting AEC?

ahmedabad: we are in this company for the long run. we are not exiting ahmedabad electricity company (aec), contends the official spokesperson of torrent group, the promoters of aec. and to add weight to his statements, he adds, we exited from the 655-mw generation project at paguthan because we wanted to be in the distribution business and not in the generation one.two-and-a-half years ago, the torrent group had sold its shareholding in the 655-mw paguthan power project making a killing of around rs 1,100 crore. but not withstanding these claims, the market is agog with speculation that the torrent group, led by its dashing chairman sudhir mehta, is keen to exit both aec and the surat electricity company. the latter is a purely distribution company, whilst aec other than distributing power in ahmedabad has a generation capacity of 490 mw. what has fuelled speculation is the rapid increase in aec's share price over the past week, from rs 57 to rs 108.40—the latter being the closing quote on bse on friday. a little over a month ago, on september 27, the scrip was fetching at rs 25! the spurt, aver analysts, is happening because some investors in the market are perceiving that there is a takeover deal being worked out. these investors feel that the torrent group could be talking to some corporates who are interested in taking over aec. so somebody feels that there is money to be made, says an analyst. since the floating share of the company is merely 11 per cent, trades in even small volumes affect prices disproportionately. on november 22, a little over 1,14,000 shares traded on nse and 20,000 on bse. analysts rule out a hostile takeover bid because of the limited floating shares. the torrent group which made its name in pharmaceuticals, took over aec in 1997. at that time, it had also acquired 10 per cent equity of the gujarat government in the company. more importantly, torrent had undertaken to buy the remaining 18.89 per cent shares that the state government held at rs 117 per share or the average price of the scrip in the last six months, whichever was higher. even though the gujarat government is cash-strapped, it has never insisted in all these years that torrent buy these shares. thus, the state government has failed to cash in on about rs 140 crore that the deal would fetch. the failure of the state to see the deal through is seen in official circles as the clout torrent's mehta enjoys in the political environment. however on the obverse side of the coin, the aec scrip had long been hovering at much lower than rs 117 and obviously torrent would have had second thoughts to buy them at the agreed price. but torrent group md makrand bhatt claims, we have committed to buy the shares at the pre-decided price and we will not go back if asked to buy. on its part, gujarat government officials are unable to explain why they have not pressed torrent to pick up the shares. presently, the torrent group owns 36.80 per cent equity in aec while banks, insurance companies and mutual funds hold some 33 per cent. aec's turnover for 2000-01 was rs 980.58 crore and the net profit was rs 23.58 crore, which was much lower than rs 34.18 crore in 1999-2000. in q2 of 2001-02, the net has fallen further to rs 10.68 crore from rs 11.29 crore last year. the lower profit is, however, on a much higher turnover. the company has an equity base of rs 113 crore. meanwhile, aec has sought to increase its tariff, but the gujarat electricity regulatory commission has not yet agreed to the proposal.