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Friday, January 6, 2012

Esab India Ltd:-Buy/sell/growth prospects and recommendation,news and results,target and analysis,view and outlook,multibagger

Scripscan:Esab India Ltd

Story:Esab India is a story which we broke out for Elantas Beck where the parent itself is a de-listing candidate. We will not see robust returns like what we saw in Elantas Beck because the free float is available right now is close to 45%.Recently, Melrose came out with a open offer with 780 pence for the parent Charter Plc which is a holding company for Esab Holding Pvt Ltd which is a parent for this particular company, Esab India. There will be a revised offer from Melrose some where around 930 to 940 pence which is substantially 20-25% premium to their last bid. It makes a lot of sense for Melrose to acquire this particular asset that Charter owns and they have got potential that will give them higher return on assets. If I look at the annualized equivalent value if at 930 they would be paying close to 7.5-8%. On the other hand ESab India is available at 14.65% in terms of EV. Annualised value if I try to take an arbitrage it takes around 11.5-12% that gives a target of Rs 640. In terms of fundamentals, even if there is no offer for Charter Plc by Melrose in terms of revision, they would still do an EPS close to Rs 44-45. A company which is going to pay Rs 20 of dividend a parent like Charter which even has got a potential to go to a better parent Melrose I think this stock is a portfolio bet.At current levels if there is an 20% open offer that means the float from the market would be squeeze totally because the remaining float will be in a very strong hands. Then the story will begin because there will be hardly any float left.We have a target of Rs 1,000 if there is an open offer from Melrose. We will definitely ask our investors not to tender into the stocks because roughly we feel that open offer can come somewhere around Rs 550 to 600 depending upon the conditions. But on longer term this stock is a portfolio bet from our side.

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