GSK Pharma to perform even post open offer; hold: Edelweiss

Q: How should one approach GlaxoSmithKline (GSK) Pharmaceuticals now? Do you think minimum acceptance ratio of 49 percent will be met or will the final acceptance ratio be much higher? Also, if a retail investor holds GSK, would you recommend tendering into the open offer or is it something that you can hold on for a long time?

A: The GSK open offer that has been announced, the minimum acceptance ratio is at a lower level of 47 percent but given the high holding of long-term holders and also the retail investors, we may expect the acceptance ratio to inch up to 90 percent or even 100 percent.

There are many fundamental investors who would like to hold on the stock even at Rs 3,100 level. So, your acceptance level if you tender into the offer could be 100 percent even and that is what we can recommend for a fresh buyer or an arbitrager. But even as retail investors, given the whipsaws in the market, such type of stock will surely be a good stock in your portfolio.

Retail investor can continue to hold on in his portfolio. Or if he wants to exit, it is better to exit onscreen rather than tendering into the offer and this is the recommendation for the retail investor or long-term holders.Q: Is the recommendation for someone who is already holding the stock to tender in at all or is it better to hold on considering there are expectations of delisting or the fact that the way GSK Consumer performed post the open offer, it never went back to the open offer price. So is it good to tender in or is it good to hold on?

A: Such type of quality stocks do perform even after the open offers and that is why if you are a long-term holder, you should surely hold on the stock. But if you are a trader, you should take an opportunity of the spread between the current market price and the offer price. But as a long-term holder, I am surely of the view that you should continue to hold on the stock in your portfolio. If you see there are many stocks that are really good in nature, they have performed brilliantly after the open offer also and that is how you should approach these types of stocks.

If you look at stocks like Bata India, Nestle, all these stocks may also come out with such type of voluntary open offers because their promoter holdings are much lower than the 75 percent, maximum limit according to Sebi mandate. Therefore, we can create a portfolio of such type of stocks to be invested in and one fine day we can make good returns in them as well.

Q: What about Tata Global Beverages and the Mount Everest Mineral water merger, is there any advice for a Tata Global investor?

A: The stock is thinly traded so even if there is an opportunity you may not yield out better. Even if you see Cinemax and PVR merger, Cinemax is a thinly traded stock. Even if there is a spread on the screen you cannot trade, same is for Tata stocks. So, if there is liquidity or real opportunity, we can surely trade those but where the liquidity is too low, it is more often paper trade which comes out.

Something like Pfizer and Wyeth, the current Pfizer holders can surely sell the stock and buy Wyeth because the current available spread is still around 5-6 percent on the screen. This is less spread as compared to 13 percent two weeks ago but the spread is contracting. So, if you want to make additional gains out of your holding, you can flip from Pfizer to Wyeth, again the liquidity constraint becomes a big factor given if you are a big holder of Pfizer, if you want to flip to Wyeth that could again be a constraint. But for a smaller holder it is a good opportunity to flip. Coming in and going out of trade becomes difficult when it is a thinly traded stock like Cinemax, not a viable trade at this juncture.