Friday, January 21, 2011

Midday / Nirma Update


I had initially written about the midday demerger opportunity and followed it up with a subsequent post when I exited the trade. Links to the post are enclosed below
The stock went Ex on the 20th and the market finally valued the radio business at Rs 8.60 per share on the closing of the day. This was in sync with my estimates of Rs 8-10 per share with 10 bucks on the outside.

I had written earlier on the Nirma Delisting opportunity and the structure of the transaction. Link of the post is enclosed below
The reverse bookbuilding closed and the company has garnered enough shares to make the delisting successful at a price of Rs260. The management has till Feb 02nd to announce its acceptance / rejection of this discovered price.
There is a side trade that can be done now that the book has closed. Typically in the event of the management accepting the price, the stock will move towards the Rs 255 mark with the arbitrageurs sealing the gap. At the current price of Rs 248 there is Rs 6-7 bucks on the table in a 10 day period. However in case the management decides otherwise and rejects the offer then the stock could settle 25% lower from here. To quote Buffett/Munger this is the classic “Picking pennies in front of the roadroller” :-) and I for sure don’t have the appetite for it.


rayhaan said...

q1.any thoughts on evaluating companies in turnaround/restructuring situations?
( interesting possibilities include indage vintners and dhandapani finance)
q2.any ideas on how to evaluate financial companies ?(like nbfcs and banks)
eagerly awaiting ur thoughts

SA said...

Hi Ninad,
Please contact at your soonest convenience to discuss the possibility of joining the author community at Seeking Alpha.

Rebecca Barnett
Seeking Alpha Editor