New Delhi, Feb 27: It's hunting season for corporate predators. A host of leading companies can fall prey to the M&A game being played in corporate India. The timing could not have been more opportune for raiders. The current market value of these companies is at their 10-year low; their scrips are available at steep discounts to their book values and asset per share. Moreover, they are among the coveted A group of the Mumbai Stock Exchange.As many as 16 companies in the A group are trading at their decade's lowest price including Arvind Mills, Ashok Leyland, Ballarpur Industries, Garware Polyester, ITC Bhadrachalam, Videocon International and Voltas. It may not be possible for potential takeover artists to train their guns on all the companies. But considering the last 10 days' takeover cases (friendly as well as hostile) where the bids have been made when the scrips of the targets have been lying low, it may be tempting for potential raiders to look at a similar assortment. Sterlite's bid for Indalcoincided with the latter's scrip quoting at its 6-year low of Rs 65. Wockhardt set its sights on Merind when its scrip had slipped to a 5-year low of Rs 80. For India Cements, Raasi Cement was an easy target when it was quoting at around Rs 55 to Rs 65. Are there any scrips in the A group that trade at a historic low?
Garware Polyester's scrip at Rs 18 trades at a steep discount to the asset per share of Rs 180 and a book value of Rs 138. Its current market capitalisation is only Rs 30 crore. Essar Steel's strong asset base and reserves yield an asset per share and book value per share of Rs 123 and Rs 70, respectively. The scrip, however, trades at Rs 17.5. Voltas at Rs 22 today is 10 per cent its scrip's 1994 high of Rs 210, while its book value is Rs 65 and asset per share is Rs 210. A 10-year low need not necessarily translate into a bid. A large market capitalisation like in the case of Essar Steel (Rs 600 crore) will certainly deter raiders. Although Tisco, at Rs 122, is trading at 8-year low, it hasa market capitalisation of Rs 4,600 crore. So is the case with Telco (Rs 6,300 crore), Grasim (Rs 2,032 crore), Tata Chemicals (Rs 2,400 crore) and IPCL (Rs 1,444 crore) which have a large market capitalisation. Though they may qualify as takeover candidates in terms of other parameters, a bidder would need large resources. Financial resources with the relative advantage over a similar greenfield project could only be the deciding factor.
India Cements found it worth forking out nearly Rs 166 crore for Raasi, while a similar greenfield project would have cost them at least Rs 500 crore. However, there are those like Apollo Tyres with a market cap of Rs 195 crore quoting at six-year low of Rs 65; Ballarpur with a market cap of Rs 134 crore is trading at its 10-year low and at 20 per cent its book value. The list is long and the targets abound. A sample of the companies in A group alone have thrown up 43 cases of potential takeover targets. In the B1 and B2 category almost one out of five companies areavailable at their historic low prices. Liberalisation apart, recession, the Asian crisis, rupee devaluation, political uncertainty have all ensured that the best of the bets are available at unimaginable rates.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
