Alfa Laval retail holding above acceptable limit: Edelweiss

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Alfa Laval retail holding above acceptable limit: Edelweiss

Alfa Laval considered voluntary delisting of its Indian business from the bourses in its board meeting on September 19. Yogesh Radke, senior manager (institutional equities) of Quantitative Research Desk at Edelweiss Capital told CNBC-TV18 that Alfa Laval’s probability to complete the delisting is slightly low as its retail holding is high.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Alfa Laval BSE | NSE 11/04/12 Are Mutual Funds betting on Alfa Laval? Other Stocks in this news Goodyear India | Timken India | BOC India |

Sweden-based Alfa Laval Corporate AB is considering delisting its Indian business Alfa Laval (India) from the Indian exchanges. However, the probability of this happening seems very low to Yogesh Radke, senior manager (institutional equities) of Quantitative Research Desk at Edelweiss Capital.

Currently, the Alfa Laval's promoters hold 16.1 million shares or 88.77% of the paid-up equity share capital. "Its current retail holding is at 10.5%, which is above the acceptable limit of 5.5%. Thus, the probability of the company getting delisted is slightly low," he told CNBC-TV18.

He recommended a long basket for stocks like Goodyear , Timken and BOC India which have a strong promoter holding. He expects these companies to announce delisting in a couple of days.

Currently, the Alfa Laval's promoters hold 16.1 million shares or 88.77% of the paid-up equity share capital.

Here is the edited transcript of his interview. Also watch the accompanying video.

Q: How would you approach Alfa Laval offer? What would you recommend the investors to do?

A: At these levels, Alfa Laval is chasing the prices. We recommend initiating longs when a delisting is expected than chasing the prices when the stock has already rallied up.

Alfa Laval's retail holding is at the higher end around 10.5%. The company needs approximately 5.5% to get delisted. It is very difficult to get retail holders for a delisted process.

The probability of this stock getting delisted is slightly low. We recommend entering into the stocks, where delisting is expected, retail holding is low and institutional holding is high.

Q: What would be the fair value price for Alfa Laval?

A: In a delisting, it is very difficult to tell a fair value for a stock. No valuation plays an important role when a stock gets delisted. In Atlas Copco, the premium was quite high and the stock got listed at a huge premium over market prices. When the delisting takes place, the holders of the stock demand for a delisting most often.

We still recommend stock like Goodyear, Timken and BOC India where the promoter holding is quite strong and the institutionals have been gradually increasing their holding in this company. Historically, these companies also attempted for a delisting, but could not complete the delisting as the retail holdings were high.

For last couple of quarters, the institutionally holding is gradually picking up. If the companies come for delisting the next time, we might see a successful delisting of these stocks at a very high premium.

Q: Which one would you track most closely as the next possible candidate after Alfa Laval? Some of these companies like ABB have clarified that they are not looking to do any such delisting?

A: The buzz is among the stocks like Goodyear and Timken of the market. It is very difficult to pin point a time when the company will come out with a delisting announcement.

We will still recommend a long basket, which would get accumulated over a time frame. One can initiate long positions in candidates like Timken, Goodyear and BOC India, which might announce for delisting in a couple of days.