Scrip Name: Mysore Petrochemicals
Mkt. CAP: 66 crores
Promoter Holding: 72.99%
CMP: INR 99
Company is associate company of IGPL .Earlier in Dec 2016 they had approved to sell their whole Maleic Anhydride business to IGPL at consideration of 74.48 Crores.
Stocks current mkt cap of 66 crores looks cheap and downside risk looks limited to 50 crores Mkt. Cap in normal mkt conditions.
Total holding value is 243 crores. IGPL holding value adds up to INR 183 crores approx.
INR 55 crores post tax of Cash with the company from sale of its plant.
Considering the rally in the stock of IGPL from Rs.20 in 2013-2014 to 440+ levels .Mysore petro has been completely ignored by the market as they do hold 13.23% of IGPL.
Now Point is whether the cash which is expected to be received by the company will be shared with the shareholders as the existing company does not have any business and it’s not a pure investment company. Likely scenario are may be it can get merged with other group holding companies of IGPL which are primarily unlisted .Just like in case of Singhanias did for Bengal Assam and Florence Investech, Kajaria Ceramics. It does not makes sense to create multiple holding companies posting the new IND AS Applicability.
Some recent holding companies movers in last 1 year
Florence invest moved from INR 500 to 1800 in 6 month Time.
Second Vindhya tele links stocks moved from 600 to 1050+ level.
Vardhaman holdings from 1400 to 3000 levels
After IND AS applicability I am not sure promoters would be keen to keep multiple holding companies as there are lot of disclosures and compliance required to be stated in reported financial statements post the applicability. Primarily that is the reason lot of promoters are restructuring by amalgamating group holding companies.
I am aware there are companies like BBTC ,BIL, Pilani Inv which are roughly trading at 70% discount but in this case it’s not a investment company and second the mkt cap it currently trading is approx. close to the cash it is holding so ultimately you are getting 13.23% holding of IGPL worth 183 crores @16 crores.
Worst case scenario if none of the above restructuring happens then also if we consider the holding company discount of 60 % to the holdings of IGPL then also it should be trading at minimum 122 crores mkt. cap vs current mkt cap of 66 crores.
Would appreciate views on the above.
Disclaimer : Disclaimer : Do have tracking position in the stock . The above opinion are completely personal opinion not recommendation to buy /sell . Please consult you Financial Advisor before taking any decision
I had a discussion with Company secretary around 15-20 days back and he told me that they will receive the money from IGPL in tranches ,In how many tranches he did not spell out. Also, the Board is evaluating new line of business so looks like there will be no distribution of cash .At the moment, things are hazy…Only positive point is holding in IGPL.
My friend you are correct things are not clear but thats the reason you are getting @ huge discount to NAV. Promoters credibility has been reasonable considering massive wealth created for shareholders of IGPL.
2nd part of your reply - It is better if they do not distribute cash . Mkts. give exponential valuation to companies on businesses rather than sitting with cash .
option 1 : As you said they have indicated new product line - my understanding is it should be related to the downstream products of Phtahlic Anyhdride . If we read the IGPL recent announcements they have clearly stated . My understanding is they might be refering the same for Mysore Petro.
(http://www.bseindia.com/xml-data/corpfiling/AttachHis/9043eb15-c79b-4bef-ae88-5318a3fbd030.pdf).
Secondly IGPL has announced for funds raising upto 150 crores so may be they would be doing some sort of JV for expansion of downstream products.
Now considering what is the best interest for the promoters
option 2 : Merge both companies then their overall stake in merged entity will increase by 2.48% Directly although their indirect holding will decrease by 1.25%. Secondly they do not need to get money out from IGPL to Mysore as IGPL itself needs capital for expansion and they have already taken approval from shareholders to raise upto 150 crores. Thirdly it will be fair for the minority shareholders of IGPL also because ultimately only net incremental shares of IGPL equivalent to 50-55 crores( cash to be paid) would be issued so on net basis there would no equity dilution .
Update:
While going through AR of 2013-2015
Company has fixed asset ( primarily land and machinery at Raichur, karnataka which company had shut down in 2013 ) the value of the same is stated at 32 crores in balance sheet . Which would be roughly RS 50 per share.
Total NAV adds upto
55 crores cash +214 crores (13.2% of IGPL MKT CAP 1650 crores)+32 crores land and building less contingent liability 3 crores =298 crores vs current mkt. cap of 81 crores.
Is this the new business that mgmt was talking about earlier?
"…to engage in trading business by way of procurement of Orthoxylene, Phthalic Anhydride…from M/s IG Petrochemicals…subject to the aggregate amount of the transaction not exceeding Rs. 100 crores…"
