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Moneycontrol.com >> Message Board >> View Messages >> G E Capital Tra
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Perspectives on GE Capital T F S (4)   02-Jul-08 16:52Tracked by (1)  
Posted by:   sanecounsel on ( 02-Jul-08 16:52 )
Price : BSE: Rs 81.25 ( 4.97 % )
Friends

GE is offering Rs.110 to delist . My view is that the market price might go up much above this figure.This is my rationale .

GE TFS is selling its assets and liabilities to GE Capital Services India for 1520 Crores and 860 Crores respectively.Post this transaction GE TFS will have cash of 660 Crores in its books . Even if only this is taken as a valuation metric ( ignoring all else including the GE brand ) the market price should be Rs.330 per share at Market Cap of 660 Crores.

I agree the negative on this company is that GE has not shared its plans for this company . But offering Rs.110 per share and valuing 660 Crore Cash at 220 Crore market Cap ( at Rs.110 the market cap is 220 Crore ) does not sound logical to me .

I also wish to share my thoughts on the scenario in case GE TFS is unable to mop up 13% share holding to comply with the delisting guidelines of 90% ownership . If the delisting does not happen then GE TFS will have no choice but to enhance the offer price from Rs.110 because

a) it has already withdrawn its rights issue and so can not go thro' that route again for another 6 months

b) It has to comply with SEBI guidelines of bringing down holdings to below 75%

c) It has to meet RBI Capital adequacy norms and that can be done only by delisting or by rights.

So if the delisting does not go thro' GE risks losing its NBFC license which GE as a parent can not afford ( as this has wider implications - Eg RBI might bar GE from opening a bank in India in the future when the market for that opens up lets assume in 2010 ) .

Further if you analyse the capital holding small investors hold over 14% of the capital ( big investors around 7% ) .So for the delisting to succeed the small investor would need to accept .

My recommendation based on my analysis is that Rs.110 is way too low and that in case we as the small investor community do not take this bait GE has no option but to pay us our rightful price which as per above arguments of having 660 Crore Cash should be at least Rs.330 per share .

I also think those investors who sell now ( eg 17000 yesterday) are those who might not be aware at all of the delisting offer .

For all that we have gone thro' with this share including the anxiety and anguish the least GE should do is to offer our rightful price .Please exercise tremendous thought before deciding to sell at this point .
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