Thanks for the timely caution for amateurs like me . However can not 3m india and Honeywell automation be considered better in terms of their product diversity, innovation culture and ability to move between sectors that is absent in Page and Eicher apart from their MNC parentage and wouldnt innovativeness be especially useful in this time when there is lot of talk on disruption. Am an amateur and hence please feel free to correct my view .
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I was looking at the price of the 3M global entity which trades at 173$ so approx 12000 Rs, where as 3M India is 23000, doesnt it makes sense that if one likes the 3M story, then one should buy the 3M US stock and not the Indian one?
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Sorry for unsolicited advice, absolute price of a stock does not make it cheaper. Go through this article to understand better: https://www.investopedia.com/articles/stocks/08/stock-prices-fool.asp
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Thanks for the article, i went through it and understand the share price is not same as valuation⌠my point however was this:
- 3M Global: Price 173 USD ~ 10000 INR vs India @ 23,000
- 3M Global P/E: 18 vs India @ 79.5 (https://nseindia.com/live_market/dynaContent/live_watch/get_quote/GetQuote.jsp?symbol=3MINDIA&illiquid=0&smeFlag=0&itpFlag=0#)
- 3M Global would get the royalty payment from India as well as other country where the company operates it subsidiary and prob owns all the tech
- 3M Global owns 75% of 3M India (though now it may dilute 3M india stake to 65% or else delist it)
So one may be getting the exposure of the global business that the company operates, at 1/4 the valuation and get two shares of the parent vs 1 share of the Indian subsidiary in the same amount of moneyâŚ
It seems too good to be true and arbitrage situation, therefore want the forum members to let me know whereâs the catch
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Share price (absolute) is no measure of valuation. Tomorrow, 3M India may decide for subdivision of shares from FV 10 to FV 2. The share price will come down to 4600 without change in business, without change in PE. Then will you say that itâs cheaper than its US parent?
Valuing 3M USA may be an altogether different game for which you may further refer to other articles in the forum on holding company discount etc.
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Due to recent budget announcement of increasing minimum public shareholding from 25 percent to 35 percent, what are the chances that companies like 3m India , honeywell etc would consider delisting and if so , how would that affect shareholders ?
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My guess is that the probability in companies of this size is zero. Mota mota calculation: India Macap is $4B. Assume 75% is already owned. So Indian co delisting would require a cash outlay of nearly $1B. Thatâs a huge amount of cash. 3M India pe is 80. Imagine how badly the parent co will fall for a cash outlay of $1B for buying a company that they already own. A 1% fall itself is $1B for the parent co. besides the management will get a seriously bad rep for such a capital allocation and frankly might even jeopardise their job. So no, for this size co, not happening.
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I believe we need to consider both side. The negative side from 3M US you have already highlighted on very high valuation and big cash outflow. However, there are following factors which may lead management to consider delisting even with such high cost:
- Increase regulation needing minority shareholder approval from royalty payment to all other related party deals
- More disclosure as compared with listed entity
- Force to share more than 1/3 of welath with small shareholders over life
- Increasing compliances on listed companies (particularly when you have only one Non US listed company globally)
So we need to wait and watch for development and see how things unflold in medium term in my view.
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I agree but on the sharing wealth part , The last 7 percent was purchased from Birla in 2013 so would it make a major difference for them to offload the shares as they would make a huge profit ? If I am not wrong , currently they dont even seem to be much focused on Indian subsidiary going by the management changes etc .
And in case they are keen on Indian opportunity, would they mind holding less just as Nestle holds about 62 percent?
Pls correct my views if incorrect as I am a beginner in investing journey
It would be very difficult for us to judge managment view about India business. However, it is fact that India is among the largest growth market in Top 10 economy and likely to remain so. China has been major growth contributor to 3M in last 2 decades and it is obvious for them to expect high growth even in Indian business. Purchase from Biral, they have another fully owned subsidiary in India. However, now 3M US has no other subsidiary then 3M India and hence the situation is strictly not comparable my opinion. It would depend whether they want to share the fruit of their products with minority shareholder (which I believe they are very conservative, as 3M India is only listed company of 3M Group beside India) or not. Shan has validly bring out another perspective about very high cash outflow and also high valuation level of Indian Subsidiary which may discourage them from delisting from Indian exchange. Let us wait and watch how future development unfold.
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A general query , that if a company decides to delist , how are rights of minority shareholders affected ? Does the company continue staying a public unlisted company or may convert to private company ? Is there a way ( and whether one should if it is a blue chip mnc ) that one can continue to hold delisted shares and whether they can be sold physically in case of mnc ?
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Now is compulsory (including private limited company) to have share capital in dematerialised form. The physical share ownership change can happen only for Transposition (change in name holder of equity holders) and Transmission (On death of equity holder). For normal equity transfer, shares need to be compulsorily in demat form.
On second point, one may continue to remain equity shareholder delisted company. However, liquidity of share and also update on company would normally only once a year as against quarterly reporting. So very limited information available. In case one find that situation and risk being fine, one may stay invested in delisted companies. You may google with this subject to get more understanding on issue.
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Not sure why everyone thinking that most MNCs would delist. I would be really surprised if that happens. Personally I donât think they would have listed in first place if they fear regulations. As long as they do not see any threat to ownership, which I do not think exists, and have long term vision for IndiaâŚthey should not delist. Btw has it happened in past when say 25% rule came or earlier? Times have changed, if you need to be in India and compete with upcoming great Indian companies, you need to be there in the open.
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Itâs simply the media thatâs fear mongering 
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True seing it all over media but donât think it will happen for most of MNCs
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Q1 FY2020 Results
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Consolidated total income at 81079.99 Lakhs: 8.8% up QoQ, 7.3% up YoY.
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Consolidated PAT at 9012.85 Lakhs: 4.9% up QoQ, 12% down YoY.
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A couple of doubts. Would this be considered a cyclical business following the ebbs and flows of the economy. If so to what degree is it cyclical. Another related one is with over 10k SKUs I wonder if the ticket size is really small? Does this company deal with small, predictable and repeat transactions?
Thanks!
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Look at EBITDA margins from 2012-15âŚaverage 8%. P/e doesnât shrink much but price probably takes a hit in sync with the lower denominator.
Sep 16 2019 Volume in 3M India
Total volume on NSE is 2,70,756 shares (Delivery 2,36,375 shares)
Total volume on BSE is 2,649 shares (Delivery 1,269 shares)
So approximately 237500 shares delivery based volume on both the exchange which mean the seller shall be holding 2,37,500 shares.
As per Top 10 shareholding in AR on March 2019, following are top 10 Shareholders along with their holding
| Acacia Partners, LP | 2,10,000 |
|---|---|
| Acacia Conservation Fund, LP | 2,06,400 |
| Acacia Institutional Partners, LP | 1,85,016 |
| Bright Star Investments Pvt Ltd | 1,66,700 |
| SBI Equity Hybrid Fund | 1,30,000 |
| Acacia Banyan Partners | 1,26,045 |
| IDFC Premier Equity Fund | 95,099 |
| Govindlal M Parikh | 41,115 |
| Nemish S Shah | 25,000 |
| IIFL Equity Focussed Fund | 24,329 |
So as per my understanding from public information, most likely seller is Acacia group entities or Brightstar group along with few other in Top 10 shareholder can only result in such large volume. While moneycontrol does provide some information about block deal in volume, I could not trace same on NSE website. I would be interested to know who is new buyer.
Having said that, I would advise investor to be diligent while making any investment decision as valuation are expensive and provide limited margin on safery.
Disclosure: I contnine to hold my investment. My views may be biased due to my holding. Cautiously evaluting developments. Not SEBI registered advisor
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