Special Situation- Piramal Glass delisting.
May 13, 2014 09:11 am |
Report 0302. Piramal Glass delisting.

On 7th Feb’2014 Piramal Glass announced to BSE there intention to delist their shares from the bourses. The announcement was made after market hours. We started evaluating the opportunity and realized that

the intrinsic value of the company is somewhere in the range of Rs 160. Just recently, the stock had corrected to Rs 70 odd. We are a little biased about the group Piramal, thanks to our investment in Piramal enterprises and a positive blog we read written by Prof Sanjay Bakshi. Based on that bias, we concluded that the management is at least high on integrity and when they plan to delist, they will delist.

Whenever one is participating in special situations arising out of corporate actions, the main risk factor is about deal going through, since we were sure (almost) of that we decided to participate in this situation.

We could not get our hands on the shares the next day as it opened gap up at 92 and then at 107 the next day. In the last week of March, when the euphoria subsided, we started accumulating the shares and our average purchase price came to 105.00.

Shareholding pattern of Piramal is such that they would not require a heavy participation from retail for the success of this offer. one or two big HNI’s could collude with the management and delist it at around 115-120. Even with this hypothesis, there was 12% left on table for arbitrators like us.

At the time of the decision, our probability matrix was. 10% chance of deal failing (resulting in a 20% loss). 80% chance of deal going through netting us 15% and 10% chance of a white swan better discovery netting us 30% return.

As we speak, the delisting process is on, the stock price is hovering around Rs 113-114. Already the ROI comes to 8.5% in 2 months. We expect to square off our position at and around 118-120. netting us 12.38% in 3 months which is many fold as better than our benchmark (Fixed Deposit rate)

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