Gwalior Chemicals - Economic Times Update

I had posted earlier thru the week on a special situations case arising in the Gwalior Chemicals stock. The economic times today put out a article on similar lines and I am enclosing the link here to the article.

I am reassured that I haven’t got the numbers wrong or have missed something in my analysis because the economic times argument and numbers are in sync with what I put out in my post.

It of course is now upto the market how they want to value cash especially one which is coming tax free in the hand as opposed to letting it lie in the bush.

Gwalior Chemicals - Special Situation

Gwalior Chemicals announced on the 8th of June that it was selling its chemical business to Lanxess. The total enterprise value of the deal is Rs 536 crores with Lanxess taking over debt of Rs 156 crores. The equity value accruing to the company would be Rs 380 crores. The company would be still left with a plant at Ankhleshwar.

The management has gone on record saying that they intend to return 100 crores out of Rs 380 crores to the shareholders either thru a one time dividend or share buyback.

The current equity capital of the company is Rs 24.67 crores.

So we are saying that the shareholder will accrue a sale value of Rs 154 per share out of which the company intends to return approximately Rs 40 per share either in the form of dividend or share buyback.

The current stock price of the company is Rs 92. A classic Graham opportunity. Either the market hasn’t figured this out or there is something that I m missing here. Looks like a very attractive deal.