Infar India: Accept

Recommendation:Accept

Sanjiv Shankaran

ORGANON Participations BV has announced an open offer to buy 24.04 per cent of the equity shares of Infar India Ltd (IIL) at an offer price of Rs 285 per share.

Organon Participations BV is the subsidiary of IIL's overseas promoter, Akzo Nobel NV. The Akzo group currently holds 50.43 per cent of IIL's equity stake.

Before the open offer, Akzo group entered into an agreement with IIL's Indian promoters to purchase their 25.53 per cent equity holding in the company at an offer price of Rs 285 per share. Following the announcement of the open offer, the Akzo group has signalled its intention to buy out the remaining shareholders and, subsequently, delist IIL.

Shareholders of IIL may consider accepting the open offer for the following reasons.

*The acquirers have clearly signalled their intention to delist the shares of the company in the event public shareholding falls to 10 per cent or below. There is a realistic chance that the company's shares will head for delisting, thereby limiting exit opportunities for shareholders.

*IIL is listed at NSE and Calcutta Stock Exchange (CSE). The trading in the company's shares are thin -- they are deemed to be infrequently traded according to the parameters set by takeover regulations.

*The offer price is set at a multiple of about 18 times the financial year 2000's earnings per share (EPS) of Rs 15.60. The price seems attractive in the current market conditions. IIL is a Rs 127-crore company that has consistently produced a high return on capital deployed in the business. But the profitability has been lower than the same recorded by other companies.

*An offer price of Rs 285 seems adequate when considered in the backdrop of the overall equity market condition and prevailing valuation for MNCs. Also, with the possibility of delisting being strong, shareholders may consider accepting the offer.

Offer price :Rs 285 per share

Offer size :14,60,955 equity shares (24.04 per cent)

Listed at :NSE, CSE

Issue opens on :September 14, 2001

Issue closes on :October 13, 2001

Manager to offer :HSBC Securities and Capital Markets