Some digging in history:
Investment and precision castings ltd:
Announced on 3rd July 2008 on BSE,that the company will be holding a meeting on 31stJula08 to obtain the consent of the equity shareholders and unsecured creditors, with or without modification, of the Scheme of Arrangement and Demerger between the Company i.e. Investment & Precision Castings Ltd and Tamboli Capital Ltd.
This is the link of the announcement made on BSE:
http://www.bseindia.com/qresann/news.asp?newsid={D7232638-4870-4086-A879-7D351F86D8AE}
On Februay 4th 2009,Investment & Precision Castings Ltd in an corporate announcement informed BSE that CRISIL assigned its ratings to BBB+/STABLE/P2 tothe variousbank facilities of the Company.
This is the link of the announcement made on BSE:
http://www.bseindia.com/qresann/news.asp?newsid={301F6C42-5B8E-4623-B2C1-2E6D07C7CF6A}
On 25thFeba09 Investment & Precision Castings Ltd informed BSE that the Board of Directors of the Company have determined March 20, 2009 as the Record Date.The swap ratio fixed by the Board is as below:
2 New Equity Shares of Tamboli Capital Ltd for every 1 share of Investment and Precision Castings held by theshareholdersof the Company
This is the link of the announcement made on BSE:
http://www.bseindia.com/qresann/news.asp?newsid={8FB1F5B1-9F82-4049-9950-47EEC08A18EA}
In February 2009, the share price of Investment and Precision Castings Ltd, was trading in a range of 37/- to 44/- , So if one had bought this stock in this range, say an average rate of 41/- to a share and we take a 1000 shares, that comes to around (41*1000=41000/-) forty One thousand rupees as investment.
The ex- date was on 13 th march 2009, and the stock price made a high of 44/- and a low of 25/-, again we take the avg. price here, i.e., which comes to 34/-, So say we sold the Investment and precision castings ltd shares which we bought at 41/- per share @ 34/-.
As a Result of the Demerger arrangement, we would have been in possession of 2000 shares of Tamboli Capital at a share price of 3.5/- per share.
Sum: (41/-*1000/-=41000/- - 34/-*1000/-=34000/-), so (41000/- - 34000/- = 7000/-) and as we got 2000 shares as a result of demerger (7000/- / 2000/- = 3.5 Rs per share price of Tamboli Capital ).
All in all we made a loss of 7000/- initially by selling the shares of Investment and Precision Castings Ltd and got back 34000/- and 2000 shares of Tamboli Capital @ 3.5/- per share. Which will soon be listed on the stock exchanges on some later date.
Lets see what happened going forward…
On March 15, 2010…nearly a year later Tamboli Capital got listed on BSE at a whopping price of 44.80, That day the high price was 44.80 and the low price was 41.10/- and the close was 43.20. Suppose we sold our shares at the day low of 41.10/-, remember our initial acquisition price was a mere 3.5/- per share. so 41.10/- - 3.5/- = 37.6/- per share, We had 2000 shares, So the Profit works out to be 37.6/-*2000 Shares = 75200/- on an initial investment of 7000/- rupees. A 10 bagger in the making.
Factors affecting us to be noted…
Demerger announcement was near the end of Bear market, and the listing of the demerged entity was in a Bull Market.
Not always, we will find such aribitrage opportunities in the market, i mean the returns will not be phenomenal like this one, but some times we do find and they might be worth looking and studying into.
I have explained the above example, as i know there are lot of smart minds contributing to this forum, who will look into such opportunities going forward and we all will get benefited discussing them.
Warm Rgds.
