Financial Daily from THE HINDU group of publications
Sunday, Jun 23, 2002
Financial Daily from THE HINDU group of publications Sunday, Jun 23, 2002 |
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Investment World
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Buyback Markets - Buyback Precot Mills: Accept Sowmya Krishnan
PRECOT Mills has offered to buyback 10 lakh equity shares, representing16.67 per cent of the equity at Rs 33 per share through the tender offer. The offer opens on June 1, 2002 and closes on June 30. Brescon Corporate Advisors is the manager to the offer. Shareholders can accept the offer and tender their shares for the simple reason that the stock is infrequently traded on the stock exchanges. The company's shares are listed on Madras Stock Exchange (MSE) and Coimbatore Stock Exchange (CSE). There was no trading for the past three years in the CSE. Traded volumes are quite low at MSE and, hence, it does not make sense to hold on to the stock. Those who decide to hold on to the stock might be losing out on an alternate investment opportunity. At Rs 33, the offer price is much lower than its book value at Rs 176.20. At Rs 32, the last traded price at MSE (as on March 19, 2002), the stock reflects a price to earning multiple of just 1.90. Though the valuation appears to be low, shareholders might not get another opportunity to liquidate their holdings. As further capital appreciation and the possibility of getting higher returns is limited, shareholders can tender their shares. The company is engaged in manufacturing of various types of yarn. The textile industry being in doldrums, its future earnings might be under pressure. The financials for the nine-month period ending December 2001 indicate the tough times ahead. Net sales slumped from Rs 214.28 crore for the 12-month period ending March 2001 to Rs 137.47 crore for the nine-month period ended December 2001. Despite strong fundamentals and low price, investor interest in the stock is affected by lack of liquidity. The not-so-good business prospects also limit interest in the stock. Therefore, shareholders can cash in on this opportunity to exit the stock.
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