Second chance: Will the GE Shipping demerger happen?

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Second chance: Will the GE Shipping demerger happen?

With news of GE Shipping giving the demerger another shot, Sachin Kasera of Pioneer Intermediaries says that the demerger is very likely to take place this time since the company has done the groundwork very well, and would not want to show a bad face a second time.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS GE Shipping demerger back on track GE Shipping to announce a buyback, dividend: Sources 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 GE Shipping BSE | NSE 25/05/12 Are Mutual Funds betting on GE Shipping?

With news of  GE Shipping giving the demerger another shot, Sachin Kasera of Pioneer Intermediaries says that the demerger is very likely to take place this time since the company has done the groundwork very well, and would not want to show a bad face a second time.

Excerpts from CNBC-TV18's exclusive interview with Sachin Kasera:

Q: They are trying, once more, to give the demerger another shot. Do you think that they will manage to do it this time around?

A: Yes, it looks like they will. I think they would have done the groundwork very well this time around. With the delay last time, and certain problems related to that, I think that the management does not want to have a bad face this time by again not going through everything. So I think that they must have done the groundwork very well and I expect that the merger should go through this time. From what I understand, with the exception of the High Court extension and something on the RBI side, everything is more or less in place. So maybe in a quarter or so we should see things flowing.

Q: Are you clear about what specifically led to the inability to complete it by the deadline last time and whether those factors have changed now or gone away?

A: What I understand is that when the High Court deadline elapsed, one of the approvals still pending was the RBI approval, apart from a couple of other small approvals. Otherwise more or less most of the big approvals were through. One of the things, which probably delayed it a bit was basically clearance from ONGC that we all know about, but I think that is also through now. So I believe that this time around things should move much faster.

Q: What about the other possibilities, which were being expected by the markets, a large dividend, a possible buyback, do you think that those are not issues, which the management may consider now?

A: Primarily, one of the reasons for the demerger taking place was the unlocking of value, and that could only happen once the offshore was demerged because the offshore has a much higher valuation than shipping. So I believe that the board did look at options in terms of a higher dividend or a payback. But I believe that the demerger is also much better for the company in terms of enhancing the shareholder value.

Q: What is your assessment of fair value for GE Shipping now, if you are building in that in the next two months, you will get an announcement on the demerger?

A: 15-20% upside from the current prices.

Q: Could it go back to Rs 280 kind of levels?

A: Yes, Rs 275-280 would be fair levels. Their asset value today is closer to about Rs 300. So I believe that Rs 275-280 should be a good price.