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New Media Headline Offer For Sale

With the deadline of June 2013 coming closer for making minimum Public stake of 25 per cent, Offer for sale (OFS) has become the new headlines for the media houses. This is because the activity has picked already picked up with promoters coming out for seeling their stake. The move came in after market regulator SEBI have asked the companies to bring down their promoters stake to 75 per cent. For further information on the same kindly read our mindshare article Titled : Stripping Down To 75%.

Earlier companies like R Power offloaded 5.42% stake in the company on Dec 19, 2012. The Offer For Sale (OFS) was subscribed 1.6x and the company raised a total Rs 1500 crore. Further according to media reports, Eros International Offer for sale was also oversubscribed 4.4 times. THE company had offloaded 2.8 per cent of the stake bringing the Promoters stake to 75 per cent, by selling 25.74 equity shares which helped them to raise around Rs  52 crore.

Here is one another company named Adani Eneterprise hitting the market with its Offer for sale (OFS). The company is offering 2.30 crore shares and the promoters have fixed floor price at Rs 282 per share. Note yesterday the shares of the company had falled almost 7 per cent to Rs 271.25, however today the stocks has bounced backed and is (currently trading almost at its floor price) at Rs 281.35 per share which is up 3.72 per cent.

Even after with these sellling 2.30 crore equity shares, its promoters stake will stands at 77.85 per cent. Hence we at DSIJ believe  that promoters would soon sale the remaining 2.85 per cent of the stake in the coming months which will help them to bring down the Promoters stake to 75 per cent. Now the question arises should one opt for the Offer for sale or should one ignore the same?

Adani Enterprises primary interests is into in energy and logistics sectors. The company's has diversified segments like trading, power, port, agro, real estate and others. On the financial front, the company posted good september quarters its top-line increased by 42 per cent to Rs 1615 crore while Net Profit stood at 141 crore against Rs 46 crore in the simillar quarter last year. Despite having good september quarter numbers one should not get carried away as the company's trend suggest that it numbers are volatile in nature and does not show consistent growth.

On the valaution front the company is available at Trailing Price to Earning multiple of 38x which we believe is on the higher side. Further FII also have gradually reduced their stake in the company. FII's stake have been cosnsistently falling since last four quarters. From 16.17 per cent in Sept 2011 to 15.08 per cent in Sept 2012. Reduction of the FII stake is also not a good signs as it signifies that they dont have confidence on the prospects of the company. This further could be proved from the fact that on YTD basis the stocks has given negative returns of around 7 per cent against the broader Indices which have appreceatied apporximately by 26 per cent.    

Overall we believe one could avoid the OFS offered by the Adani Enterprise.

Further according to economic times reports, Honeywell Automation offloaded 5.51 lakh shares at approximate price of Rs 2314.7 per share, representing 6.24% of the total share capital taking down the promoters stake to 75 per cent of the company through an OFS. However one thing to note was that Reliance Mutual Fund acquired  almost 97% around 5.36 lakh shares which were sold by promoters.

Here the question arises as to why Reliance Mutual Fund took large part of the sale?  If Reliance Mutual Fund truly felt some strong fundamentals in the company than they could have accquired the stake earlier also. Is is just like LIC saving the PSU disinvestment at the last hour of trade? We believe SEBI should finds out whether there was any kind of communciation which resulted into buying of huge stake ? Or was it just a pure Realince Mutual Fund calls?