Buy Insilco, says Aashish Tater

Buy Insilco, says Aashish Tater, Head of Research, Fort Share Broking.

Tater told CNBC-TV18, "The parent of Insilco is German based Evonik Industries, Degussa GmbH. We have been studying foreign players very closely and feel that whenever the parent starts making a move into any of their subsidiaries the plan has to be very big. I am just taking a call by removing any financial aspect, the company from Rs 16 crore of turnover has moved to Rs 22 crore."
He further added, "They are into silicates precipitates. The parent is planning for an IPO and it failed last time because of poor conditions in Germany. But the valuation that the company is looking at is 14.4 billion euro, roughly around USD 17.5 billion. The company in its prospectus said that they are looking for emerging markets where they would be substantially investing this huge amount, 25% of which is diluted."
"This means you get USD 4-4.5 billion which will be invested into Chile, India and other emerging markets. They have not given a breakup and it’s just a call that if the company makes a substantial investment they have to come through this particular subsidiary. The first move that the company will take is going be delisting. If that happens, then the company will play Rs 50-70-80 crore for the free float, which is roughly Rs 36 crore right now, 2-2.5 times from current levels. But this call needs to be understood, the downside here is Rs 2-3, which is roughly 10-15%, but the upside can be much higher."
"The company has expanded its capacity by 40%. We have studied how Dr. Beck or Elantas Beck from Rs 150 came to Rs 800 and now at Rs 1,800. The second stock in the similar pattern was Vesuvius India. It was Rs 100 stock but because its parent was shifting operations to emerging market, it came to Rs 400. Despite the market not moving much in last one and half years, these companies have rewarded their shareholders very smartly. Alfa Laval got delisted, as the parent started shifting operations."
"So, this is one stock which should be part of your portfolio from longer term perspective. It’s a bargain hunt, because Rs 36 crore for a company which is going to get USD 4.5 billion maybe by March 2013. So, this stock should be bought with a view that whatever you are going to allocate in the small cap stock might end up at the current price or will give a return of almost 2-3 times if the delisting processes happens. The delisting process might be blind call right now. But even from its fundamentals this is going to be a very interesting bet at current levels." Disclosure: Safe to assume stocks discussed have been recommended to clients, no personal position.