Cigarette major ITC's subsidiary Russell Credit is the highest bidder for the Andhra Pradesh government's 4.69 per cent stake in VST Industries Ltd.

It quoted Rs 215 a share, ahead of the Rs 172 bid by stock broker RS Damani-controlled Bright Star Investments.

Russell Credit's bid is 22.43 per cent higher than Friday's Rs 175.60 closing price of the VST scrip on the National Stock Exchange.

Russell Credit's acquisition of the Andhra Pradesh government's stake is unlikely to trigger an open offer for another 20 per cent in VST.

Russell Credit holds a 9.6 per cent stake in VST -- it has reduced its holding from 10.48 per cent on June 3 -- and after the acquisition, the holding would go up to 14.29 per cent, Sudip Banerjee, director, Russell Credit, said.

Despite its claims to the contrary, going by ITC's eagerness to acquire control of VST, Russell Credit might consolidate its holdings through an open offer.

The strategy of Bright Star, which holds a 19.70 per cent stake in VST, in that case will be worth watching. Bright Star and Russell Credit made parallel open offers for 20 per cent stakes in VST at Rs 151 a share in June 2001.

Among the other bidders for the state government's stake in VST were Life Insurance Corporation, which quoted Rs 165 a share, and the Kolkata-based CD Equisearch, which bid Rs 160.05.

BAT Plc, which holds a 32.16 per cent stake in VST, opted out of the bidding for want of foreign investment clearance.

"BAT has no comments to offer on the issue and sees the development as a matter between ITC and VST Industries," a spokesperson for BAT told Business Standard from London.

"BAT is the single largest shareholder in VST, but it would not be correct to describe it as the promoter," the spokesperson added.

Public holding in VST on June 30, 2003, stood at 16.24 per cent. Financial institutions holding stakes in VST include GIC (1.20 per cent), LIC (6.30 per cent), National Insurance (1.51), New India Assurance ((2.83 per cent), Oriental Insurance (1.65 per cent) and United Insurance (1.37 per cent).