Stock Review: Nirma

 

NIRMA, a homegrown consumer durables company that took on multinationals like HUL and Procter & Gamble in detergent, soaps and personalcare products segments, is close to delisting its shares on stock exchanges after its offer to exit received a positive response.

   Several shareholders have tendered their shares in the offer that closed on January 20, which will push up the stake of the promoters, Karsanbhai Patel and family, to 90% — the limit prescribed by the Securities and Exchange Board of India (Sebi) for a listed firm to delist its shares, said a shareholder of the company with knowledge of the offer.

   Public shareholders holding 2.17 crore shares, or more than two-third of the offer size of 3.6 crore shares, tendered shares at . 260 or a little below it compared with the floor price of . 218 for each share. The promoters are expected to accept their shares at the maximum price which will be at the small premium over the current share price. The Nirma stock closed marginally higher at . 250.4 on the Bombay Stock Exchange on Friday.

   The formal announcement on the exit price being offered to the public shareholders is expected on Wednesday, said the person quoted earlier. Nirma officials were not available for comment despite repeated efforts to contact them. The company also did not respond to an email questionnaire.

   At a price of . 260, investment bankers say that Nirma will be able to delist its shares at a reasonable price unlike similar offers in the past where the promoters had to pay a huge premium over the floor price. The premium over the floor price will be substantially lower than the 25% that Sebi had recommended in its draft proposal on new delisting guidelines, according to them.

   Last year, HSBC Investdirect, the retail broking subsidiary of HSBC Securities, successfully delisted its shares at . 400 per share, which was more than three times the floor price.

   Nirma is promoted by well-known entrepreneur Karsanbhai Patel under whose leadership the company emerged as a prominent FMCG firm with a turnover in excess of . 3,000 crore last year. It posed a major competition to FMCG giants such as Hindustan Unilever and Proctor & Gamble by selling low-priced products in a fiercely competitive environment. Mr Patel together with his relatives currently hold a stake of 77.2% in the company. If the promoters accept all the shares tendered in the delisting offer, they will end up controlling more than 90% of the share capital. This will mean that the rest of the shareholders will be offered an exit option as part of the delisting process.

   A growing number of companies, including multinationals and their local counterparts, have firmed up delisting plans with valuations declining to attractive levels after the recent downturn in the stock market.

   Apart from Nirma, six more companies including BOC India, Sparsh BPO, Kennametal India, Binani Cements, Atlas Copco and Carol Info Services, have announced such proposals, according to the list compiled by broking house Edelweiss Securities.