Question

Using the same 3rd December 2003 stock price data, SIFY's BSE opening price was Rs 232 and its BSE closing price was Rs 247.

In an M&A deal, SIFY is purchased by its parent company SATYAM, which purchases 15% of SIFY's equity shares. Total SIFY equity shares are 1 million. How much does Satyam pay in rupees for the stake if 50% of its purchases were on BSE's opening price and the balance on BSE's closing price?

• A. 36 million
• B. 3.5 million
• C. 363 million
• D. 217 million

Hint:

Find the number of shares bought (15% of 1 million), split that into two equal halves, and value each half at its own BSE price before adding, or equivalently multiply the total shares by the average of the two prices.

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
Rather than computing the two halves separately and adding, we can use the average price paid per share, since the purchase is split exactly 50-50 between two prices.

Step 2: Key Formula or Approach:
When equal quantities are bought at two prices, the average price paid per unit is simply the arithmetic mean of the two prices.
\[ \text{Average price} = \frac{\text{Opening} + \text{Closing}}{2} \]

Step 3: Detailed Explanation.
Average price per share $= \dfrac{232 + 247}{2} = \dfrac{479}{2} = 239.5$ rupees.
Number of shares purchased $= 15\% \times 1{,}000{,}000 = 150{,}000$ shares.
Total payment $= 150{,}000 \times 239.5 = 35{,}925{,}000$ rupees.

Step 4: Final Answer:
This equals about 35.925 million rupees, which rounds to Rs 36 million, the same result reached by valuing the two halves separately.
\[\boxed{36 \text{ million}}\]