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MCFL - Competitive bidding, a Special situation

Mangalore chemical & fertilizers ltd., a profitable concern of Vijay Mallya, is currently under takeover competitive bidding process! Deepak Fertilizers and Zuari-UB group combine are the two parties involved in this bidding war to acquire stake.

Initialy Deepak fertilizer provided a bid for acquiring rest of the stake from shareholders at 68.55. Shares of MCFL was trading at around 74 rupees. Knowing the competitiveness of the situation, i went on to purchase share even at 74. Vijay Mallya wouldn’t like to lose his one successful enterprise. For both Zuari and Deepak fertilizers, this company would give them strong South Indian entry. Also, these two entities where involved in purchasing the share right since 2012! So i evaluated a decent profit as there is a competitor, who doesnt want to lose out his valued opportunity! The competitive bidding just got fiercer with Zuari rising the offer price to 81.6 and Deepak raising it further to 93!! The share price too reflected the same! I am currently awaiting the move from Zuari before taking a decision to sell or hold!

Hi Vinoth, this does seem interesting as bidding war can heat up. Alsothe stock isnt costly specially in view of Price to Sales ratio of below 0.3.

But keep in view the gas pricing decision of the govenment due in November and its effect on this company & also the risk thatZuaricouldgive up due to its own debt situation.

True Gaurav. But my view is to consider this opportunity as a trade not to stay invested just like how Buffet want to evaluate a special situation. He just would like to consider it like a trade with just understanding the logical possibilities of deal going through at certain price which can be providing an excellent return and Probabilities of deal happening! I never went into finer details for this company Gaurav.

Alsothe thatZuaricouldgive

Hi Folks,

Just trying to go through this company. Have you tracked this recently. What prospect do you see for the company as they will now be producing Urea from Gas instead of Naptha. My sense is the cost of Gas is almost half that of Naptha.

Also, how do you see the government subsidy panning out. Govt. recently announced that they would pay up the subsidy amount to all fertilizer companies by March 2022. MCFL due is about 1100 crs. Do you think they will benefit in terms of their interest cost, if they receive this subsidy amount.

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