Delisting Candidates

January 13, 2012 In June 2010, the Ministry of Finance, Government of India, had issued guidelines pertaining to minimum public shareholding for all listed corporates. The guidelines were later revised in August 2010. As per the guidelines, all private sector listed corporates must have at least 25% public holding while listed PSUs should maintain a minimum public holding of at least 10%. The corporates were given time of three years to abide by the guidelines. The deadline for companies to achieve the stated level of public holding is June 2013. The corporates, particularly fundamentally strong multinational companies (MNC) may not have the inclination to increase their public holding and may resort to delisting to have better flexibility in taking business decisions. The case for delisting becomes stronger in the current weak trend prevailing in the equity markets, which has led to a substantial fall in stock prices providing an opportunity for such corporates to buy out the remaining stake with the public at lower valuations. The chances of a delisting offer succeeding also appears higher due to a moderation in return expected by the public shareholders and the enhanced willingness to exit the stock even at a marginal premium to current stock prices. We have analysed and identified MNC companies, which would be probable delisting candidates. We have filtered the companies based on the criteria of a minimum promoter holding of 75% and return on capital employed (RoCE) higher than 10%. We have further looked into the availability of funds to buy back the public holding. Exhibit 1: Delisting candidates
Funds Funds Funds required required required to to Surplus to Surplus Surplus buyback buyback after after after buyback 3 public public buyout buyout public holding at holding month buyout at at 10% at 20% holding at 20% stock 10% at CMP(2) premium (| premium return CMP(3) premium(4) premium(5) ( | cr ) (| cr) (| cr) ( | cr) (| cr) (%) cr) 3322 486 299 224 158 30 158 175 8 202 34 70 66 694 559 389 715 1000 3654 534 329 247 174 33 174 193 9 222 37 77 73 763 615 428 786 1100 3986 583 359 269 190 36 190 210 9 242 41 84 80 833 671 467 858 1200 3 -23 -29 -17 -30 -14 -8 0 -2 -4 11 11 -18 -6 25 25 1 -14 1387 193 127 92 82 37 35 32 -9 -28 -30 -42 -47 -247 -253 -268 -365 -734 1054 144 97 69 66 34 19 15 -10 -49 -33 -49 -54 -316 -309 -307 -437 -834 722 96 67 47 50 32 3 -3 -11 -69 -36 -56 -61 -386 -365 -346 -508 -934

Company Name Oracle Fin.Serv. Novartis India Honeywell Auto Timken India Thomas Cook (I) GMM Pfaudler Fres.Kabi Onco. Ineos ABS (India Singer India Kennametal India Fairfield Atlas Wendt India Warren Tea Gillette India Alfa Laval (I) Astrazeneca Phar Blue Dart Exp. 3M India

CMP (|)

Share Promoter holding holding date (%) 80.4 76.4 81.2 80.0 77.1 75.6 90.0 83.3 78.9 88.2 83.9 79.7 83.5 88.8 88.8 90.0 81.0 76.0

MCAP (| cr) 16940 2060 1595 1123 692 122 1581 1052 37 1704 211 344 402 4978 3892 3771 4169

PE ratio

Year end

Funds ROCE RONW available(1) (%) (%) ( | cr) 22.2 33.8 28.6 20.4 15.2 17.6 10.8 34.5 13.9 43.0 22.0 44.8 26.4 22.9 41.9 49.8 28.3 30.1 20.8 22.6 21.6 14.4 11.5 11.6 9.5 23.1 27.0 29.8 37.9 30.1 18.2 14.7 27.0 31.7 19.0 20.2 4708 679 426 316 240 67 193 208 -1 173 4 28 19 447 306 121 350 267

2018 201112 630 201109 1840 201109 184 201109 37 201109 90 201109 110 201109 598 201112 34 201109 789 201109 73 201112 1659 201109 360 201109 1887 201109 2756 201109 1558 201109 1612 201109 3650 201109

17.1 201103 13.3 201103 16.1 201012 17.7 201012 13.0 201012 12.1 201103 55.8 201103 15.9 201012 10.1 201106 18.0 201106 10.4 201103 18.8 201103 20.8 201103 39.0 201012 52.2 201103 30.4 201012 49.0 201103

6174 100.1 201106

Source: Capitaline, ICICIdirect.com Research

(1) Funds available = net current asets + Investments - debt (2) Funds required to buy back public holding at CMP = (100 - Promoter holding%)* mcap (3) Surplus after buyout at CMP = Funds available - Funds required at CMP (4) Surplus after buyout at 10% premium = Funds available - Funds required at 10% premium (5) Surplus after buyout at 20% premium = Funds available - Funds required at 20% premium

ICICI Securities Ltd. | Retail Equity Research

Pankaj Pandey

Head Research ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No. 7, MIDC Andheri (East) Mumbai 400 093 research@icicidirect.com

pankaj.pandey@icicisecurities.com

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