Oracle, the world's second largest software company after Microsoft, surprised the market last week with a sharp revision in its open offer terms for I-Flex [Get Quote]. The offer price was raised to Rs 2,084 per share from the earlier Rs 1,475.

The company would also pay Rs 16 for the delay in the open offer, making it a round figure for Rs 2,100 for those holding the stock. Oracle also raised the offer size from 20 per cent of equity to 34 per cent, which could take Oracle's stake in the company to around 90 per cent. The offer would cost Oracle Rs 5,962 crore (Rs 59.62 billion).

The stock surged to a high of Rs 2,068.90 on Monday and was last quoted at Rs 2,015.30 on Wednesday the 13th.

Investors holding the stock have three options. They can tender the shares in the open offer, sell it in the market or keep holding the stock. Before we dwell on these options, it would be in place to understand the valuations of I-Flex and what could happen in future.

At the offer price of Rs 2,100, the stock is one of the most expensive stocks in the IT space. On expected 2008 earnings, the stocks go at a PE of around 36. Infosys [Get Quote] and TCS [Get Quote] are around 23 and 36 per cent cheaper by those standards.

Most analysts have advised I-Flex investors that they may tender their shares in the open offer, as the price is very attractive.

My advice, however, is different. Long-term investors, who have held the shares for more than a year, should not tender their shares in the open offer but sell it in the market, though the current price is around Rs 85 lower than the offer price.

Though the investor gets a lower price by selling in the market, his proceeds, net of taxes, would be higher.

Long-term capital gains are exempted only in those cases where the transaction takes place on the exchanges. An investor may end up paying 10 per cent capital gains on his stocks if he tenders his stocks in the open offer, though he may have held the stock for more than a year.

Investors who are holding the stocks for less than a year, with a cost of acquisition of Rs 1,600 or less, should also consider selling their shares in the open market. Investors whose cost of acquisition is higher, which is unlikely unless they have bought the stock in the past three weeks, should only consider tendering their shares in the open offer.

Oracle has assured that unless the stock price falls substantially from the current levels, the stock would not be delisted at least for the next five years, but there are no takers for this argument. The thinking on the street is that it is only a matter of time before the stock is taken off the bourses.

In the event of a future de-listing, the pricing would have to be arrived at by a reverse book-building process, with the floor being the average traded price of the past 26 weeks, when such delisting is considered.

There is a small segment of investors who think continuing with the stock may get them higher returns. While I agree that possibilities exist for a higher price at a later date, investors wanting to play the delisting game can consider taking their luck to other probable counters like 3M India or Honeywell [Get Quote].

3M India is the only listed company of the parent outside the US, though there are no stated plans to delist the stock. Astra Zeneca Pharma offered to delist the stock but found the discovered price of Rs 3,000 too high, against a floor price of Rs 825. The stock now quotes at Rs 602.10.

FCI OEN Connectors [Get Quote] is another stock that saw an open offer to acquire 20 per cent shares in the company at Rs 405, earlier this year, but failed to get any response. Even if there is no follow-up offer, the stock is worth a look with a PE of around 11 times.