Shares in Mangalore Chemicals and Fertilisers (Mangalore Chemicals) hit a record high on Thursday, soaring 10 per cent to Rs68. That follows another 10 per cent rise in the previous session, as recent share purchases suggest the company may be on the verge of a takeover.

Is the empire of Vijay Mallya, the self-proclaimed King of Good Times, crumbling one company at a time?

After losing control of United Spirits to UK-based Diageo last week, it looks like Mallya may be on the verge of losing Mangalore Chemicals too.

Most readers won’t have heard of the company but Mangalore Chemicals isn’t small fry. In the 2011-12 financial year, the most recent financial statement available, the Karnataka-based fertiliser and construction chemicals producer recorded earnings before interest, taxation, depreciation and ammortisation of Rs2.1bn ($35m) on sales of Rs37.2bn, its highest turnover ever.

Mallya’s United Breweries group is currently the company’s “promoter” – a term used in India to refer to the entity that controls a business – with a 22 per cent stake. But in the past week, there have been rumblings that suggest Mallya’s position is at risk.

On Wednesday, Zuari Fertilisers and Chemicals increased its stake in the company from 10 per cent to 13 per cent.

That comes less than a week after Deepak Fertilisers and Petrochemicals upped its equity stake to 24.5 per cent – just short of the 25 per cent threshold at which India’s Takeover Code requires investors to launch an open offer for a further 26 per cent shareholding.

A statement from the company, dated July 3rd, says:

Given DFPCL’s considerable strengths in the fertiliser business, the investment is very strategic and a good fit with the Comapny’s business.

“We are just coming into a plausible takeover bid by two interested parties,” Jagannadham Thununguntla, head of research at SMC Global, told beyondbrics.

Is this something that’s happening against Mallya’s will?

Well, in the Indian environment it seems unlikely that either bidder will try for a hostile takeover. “Indian regulations are not conducive, meaning what eventually happens only has to happen through negotiation and taking the promoters into account,” Thununguntla explained.

If a takeover does happen, it will be a further blow to Mallya. The good times began to go sour with his airline, Kingfisher Airlines, which is now out of service and without an aviation licence after the debt-ridden carrier was unable to pay its employees.

Then just last week, Diageo overtook the maverick Indian business mogul as the controlling shareholder of United Spirits, the maker of McDowell’s rum and Four Seasons wine, which is said to control 60 per cent of India’s drinks market.

If Mallya is forced to cut the umbilical cord on Mangalore Chemicals, he will be left with little bar a large collection of cars and properties, and a team in India’s corrupt IPL cricket tournament. Even the Kingfisher calendar girls might not cheer him up.

Related reading:
Diageo: will 25.02 per cent of United Spirits be enough? beyondbrics
India: UB shares rally (mysteriously) on Heineken holding reshuffle, beyondbrics
Fight looms over United Spirits cash, FT
Skirmish over grounded Kingfisher jets, FT

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