Investors Dump Stock, Prabhat Sale May Bring Little Cream
Jan 24, 2019 | 12:11 PM IST
Jan 24, 2019 | 12:11 PM IST
The sale of Prabhat Dairys fresh milk business to French firm Lactalis has not gone down well with investors with the stock dropping 14.3 per cent to shut at Rs 79.75 on tuesday. The business, that was sold-out for Rs 1,700 crore, contributed nearly 98 per cent to the companys revenues.
The deal is going on at an 80 per cent premium to the companys capitalisation of Rs 909 crore on monday, however that did not enthuse investors. Analysts aforesaid the structure of the deallack of clarity on however the company can use the deal takings have not gone down well with investors.
Though the deal worth is at important premium to current enterprise worth of the corporate, there's lesser clarity on the companys intent to sell its core business and invest within the existing Bos taurus feed business, aforementioned Kaustubh Pawaskar, analysis analyst, Sharekhan. If management shares a considerable portion of the sale takings with the shareholders, then it'd be a positive,otherwise the deal wouldn't be fruitful for existing shareholders.
The business was sold-out for 1.1 times companys FY18 sales of Rs 1,554 crore. Prabhat shares soared 20 per cent in early trade on tuesday in response to the deal announcement however the optimism fizzled out with the stock falling 30 per cent from the days high. The stock has fallen 58 per cent in the last one year. Some analysts said the deal has not been structured well to benefit existing minority shareholders.
The business was sold for 1.1 times companys FY18 sales of Rs 1,554 crore. Prabhat shares soared 20 per cent in early trade on tuesday in response to the deal announcement but the optimism fizzled out with the stock falling thirty per cent from the days high. The stock has fallen 58 per cent within the last one year. Some analysts aforementioned the deal has not been structured well to learn existing minority shareholders.
We are negative on the deal as the promoters ar selling 98 per cent of total company revenue, but Prabhat dairy shareholders can only profit to the extent of 29 per cent of the sale worth as Prabhat dairy owns 29 per cent of the corporate being sold-out directly, with the rest command through another companys subsidiary firm Cheese Land Agro, said Sameer Kalra, founder, Target finance. Prabhat Diary may have united Cheese Land Agro with itself and so ought to have sold-out the business for a clean deal."
Prabhat can currently target its cattle field and animal genetic science business with the sale of its dairy business. Market participants maintain that corporations ar selling their core divisions, that contribute a considerable part of their revenues, without any advantages accruing to minority shareholders, who ar in no position to block the sale.
shareholders, who ar in no position to block the sale.
Investors have lost confidence in these kinds of deals as there ar examples where shareholders were not rewarded with the sale proceedings, said Ashutosh Mishra, head of analysis, Ashika Stock Broking.
Analysts said in instances wherever core businesses ar sold called 'slump sale minority shareholders find yourself at the receiving end.
Recently, Porinju Veliyath, manager, Equity Intelligence India said in a very letter to his investors that LEEL Electricals had received Rs 1,550 crore cash from sale of the buyer consumer goods division to Havells however the company diverted nearly Rs 340 crore to promoter entities together with the listed debt-laden Fedders electrical as cost and loans for purchasing land and factories of their own plants. Equity Intelligence control nearly 8 per cent in LEEL.
Now Follow Porinju Veliyath's Latest Portfolio, Holdings And Track his Picks With Us. To Know His Latest Stock Picks Read Porinju Veliyaths Latest Portfolio, Holdings, And Picks March 2019