Avery India to de-list today; indicative price Rs 83

Electronic scale manufacturer Avery India will de-list today. The company has announced an indicative price of Rs 83 per share. However, this is not the maximum price and investors can bid for higher price.

Here is a verbatim transcript of Nimesh Shah’s comments on CNBC-TV18. Also watch the accompanying video.

Avery India has announced a de-listing today with an indicative price of Rs 83 per share. However, this is only an indicative price and not the maximum price. Investors can bid for higher price. The delisting is via reverse book building process which opens on June 26 and closes on July 1 which means June 26 onwards investors can put in their indicative bid price and the price at which the maximum bid is put in. Then the company takes the call whether they want to accept or reject the delisting price. The overseas promoters at this point hold 78.28% and they are making an open offer for 23 lakh shares which is 21.2% stake.

It seems like the market was anticipating such a move from the parent company, yesterday the stock was up 10% and it is trading at a 52-week high of Rs 123.

Fundamentals of the company:

The FY09 EPS is at Rs 7.94 which means at the indicative price the stock is trading at 10 times FY09 earnings. It looks like they want to consolidate their India holdings and that is the reason why they are looking at the delisting offer.

A lot of MNCs, of late, have looked at delisting. Last was Matrix-Mylan with an indicative price of Rs 150 and they actually accepted the delisting price of Rs 200. So we need to watch out at what price the bids come in. In this case, the important thing to watch out is that there is not a single institutional investor which is holding more than 1% stake. There are more chances of this offer going through because only the general public hold the remaining 20% stake in this company.