Tube Investments, unit of the Murugappa Group, is set to acquire the majority stake in Shanthi Gears, the country's second largest industrial gear box manufacturer located in the southern Indian city of Coimbatore.

The Chennai-based Murugappa group company will acquire the entire 44.12 per cent stake from Shanthi Gears' promoter Mr Subramanian for about Rs 292 crore. The company will buy 3.60 crore shares owned by Mr Subramanian.

Tube Investments will also acquire an additional 26 per cent equity stake in Shanthi Gears at Rs 81 per share. The price is about 28 per cent above the market prices of the shares. The deal will help Tube Investments increase its stake in Shanthi Gears to 70.1 per cent from 44.1% stake at present.

The additional 26 per cent stake will be acquired from three existing promoters of Shanthi Gears including P Subramanian, Shanthi General Finance and Shanthi Social Services. The company has appointed Enam Securities as the manager for the deal.

The shares of Shanthi Gears rose sharply after the deal was announced and its shares were locked at the 5 per cent upper circuit at 52-week high of Rs 63.15. On the other hand, the shares of Tube Investments rose 8 per cent to Rs 157.