Friday, December 12, 2008

Andhra Cement

This week there was a news report in the economic times talking about how MNC cement companies like Lafarge, CRH, Italicement have envisaged interest in taking over Andhra Cements which is part of the Duncan Goenka Group.

The ET also speculated that the buyout could happen around the Rs 75 mark looking at historical M& A benchmarks in the industry. The stock promptly closed the day up 20% on the circuit at Rs 18.72. The stock has been moving circuit to circuit and closed at 24.70 yesterday.

I unfortunately haven't been on this gravy train :-) and I don’t see how I will get on as a I think the stock would continue moving up on the circuit till maybe the Rs 50 mark.

So what is it that interests me in the stock?

The current promoter holding is about 73.19% and of the remaining 26.81% the holding pattern has

IDFC - 6.6%
Fidelity - 5.58%
HDFC - 4.53%
Total - 16.70%

There is very less public shareholding in the stock. Once the dust settles down post the deal announcement and based on where the price settles down there could be a arbitrage opportunity playing out during the open offer and a potential delisting play.


REVerenD said...

something sure seems to be cooking...but with less than 6 %
public holding how do you think the small investors are given a fair deal...?

Ninad Kunder said...

Hi Reverend

I think if the small investor who is currently invested in the company gets a similar exit price as the promotor then it would be a fair deal.



Anonymous said...

Just look at their capacity..And check their Fixed Assets or CWIP to see whether the capacity (current and expected expansion) reported by the media is reflected in the financials or not .. you may find the answer interesting...Just find the amount required to set up one metric tonne of capacity and see whether the cos gross block of FA or CWIP reflects it..

Ninad Kunder said...

Hi Anon

Nice insight :-). I did notice that and a few other red flags on the balance sheet and the results.

My take on the stock is not a fundamental call but purely a arbitrage bet. Fundamentally I would steer clear of it.

Previous deals have between the $100 to $200. I think mysore cement was around $108.