Mahindra Ugine may move to Rs 130-150: SP Tulsian

SP Tulsian of sptulsian.com told CNBC-TV18, "I am extremely positive on Mahindra Ugine because if we see the swap ratio, 100 shares of Mahindra Ugine will be getting 284 shares of Mahindra Forgings. We all know that Mahindra Forgings has an open offer at Rs 81 on the present equity. I am not referring the expanded equity. That will keep the prices stable at levels of Rs 65-70. So that can make the stock of Mahindra Ugine to move to a level of maybe about Rs 130-150 because the stock is frozen on the upper circuit today at 10 percent and this phenomenon will continue for quite some time."

He further added, "The second stock that comes is Mahindra Forgings. In that, as I said, the open offer is at Rs 81. If we expect 53 percent shares getting transferred by Mahindra and Mahindra (M&M), we will be having 48 percent float of which 26 percent will be going for the open offer. So, we will be having an effective acceptance ratio of 60 percent. That will keep the prices of Mahindra Forgings at a level of about Rs 66-70. I don’t see it going beyond Rs 70-71 because the whole open offer permission may come in about three-four months and that will keep the prices hovering around those levels. Third is the Mahindra Composites, again having the open offer in that stock also." Also Read: Mahindra Ugine, Forgings hit 52-wk high on deal with CIE "So, this is the overall scenario. But if we take the situation now, everything is percolating now down into M&M. They will be eventually holding the stake in Mahindra Forgings, the merged entity, to the extent of about 26-27 percent. They will be having 13.2-13.3 percent in the CIE Automotive which is the Spanish company. So, going forward, all those things are happening on a cash neutral, maybe a marginal investment of about Rs 60-70 crore," Tulsian said. "Mahindra group have planned their foray in a big way on a global scale. They are eying for Latin America which is a very big market for the casting business. That will give them a good upmove in the time to come. What I really found was that the deal has happened at a very competitive valuation of less than USD 1 billion having given valuation to CIE Automotive of which 13.5 percent stake is being acquired by M&M." "I am not here to say that M&M today is up by five percent because of this, because M&M has a larger portfolio. M&M is a holding company for many of the stocks like M&M Financial, Tech Mahindra, Mahindra Satyam, even casting, forging business that is Mahindra Systech, but yes, going forward this deal seems to be quite good for the Mahindra group per se and even for M&M," Tulsian said.