Silverline volatile after acquisition announcement

NetScribes/Ganesh Ramamoorthy

The Silverline Technologies scrip witnessed huge volumes to the tune of 16.8 mn shares on Friday, at the National Stock Exchange, following the announcement by the company that it is close to acquiring a US software company. The Silverline board is meeting on Monday to consider this acquisition.

However, early gains made by the scrip eroded due to profit booking at both the NSE and BSE. The scrip opened higher at Rs 435, hit a low of Rs 410.30 in early trade before hectic buying pulled it all the way up to 447.30. On Thursday, the stock had hit the upper circuit on the news.

Sources at Mukesh Babu Securities told NetScribes that Silverline is planning to acquire a US-based software company that has revenues in excess of Rs 5 billion - three times Silverline's revenue of Rs 1.9 billion. "In such a scenario, the deal would mostly be a stock swap, rather than an all cash buyout," the source said.

Silverline Technologies, has issued 5.2 million ADS (each ADS comprising two equity shares) and raised US $108.75 million this financial year. Silverline has 74.9 million equity shares outstanding after the offering. The company is planning to use the ADS proceeds to fund its acquisitions in the US and Europe as part of its market expansion plans.

At the NSE, the Silverline scrip opened higher at Rs 435 (up Rs 15 from the previous close of Rs 420), before hitting a low of Rs 410.30 in early trade. However, hectic buying in the afternoon session saw volumes surging and the scrip price moving up to the day's high of Rs 447.35.

However, early gains made by the scrip eroded at both the bourses, as brokers began to book profits during the fag end of the trading session. The scrip closed at Rs 426, up marginally by Rs 6 at the NSE with a volume of 16.8 million shares, while at the Bombay Stock Exchange, the scrip closed at Rs 426.25, down Rs 5.85 from the previous close with 9.41 million shares changing hands.

A BSE broker attributed the high volumes at the counter to the company's announcement of acquisition. He says, "Yesterday's acquisition announcement had some impact initially and volumes soared but the scrip was moving in a very narrow range of just 1 to 2 per cent above or below yesterday's close price." The market is keenly awaiting the mode of settlement of the purchase consideration for the proposed acquisition.

The Silverline board meeting on August 28 will consider the acquisition proposal and also the mode of payment. The meeting will also consider an increase in the authorised share capital of the company alongwith a further issue of shares under an employee stock option plan (ESOP) for employees based in India and an ADR-linked stock option plan for employees of subsidiary companies.

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