Stock Review: Wendt India

Wendt India is an exact proxy to Alfa Laval , where promoters were paying to acquire new companies at an annualized equivalent value of 11.5-12%. Now this is one stock which we have been tracking as a delisting candidate for the past year. However, we have now changed our view because we feel that this is a portfolio bet, not just a delisting candidate when it was hovering around at Rs 1000 mark. What interests me is that its parent Winterthur technology has been taken over by 3M India.

Now the company is promoted by two groups, an Indian promoter from the Murugappa group - Carborundum Universal and now 3M India which controls almost 78% share. I don't think any of these two promoters would like to reduce their holdings to that 75% mark. On the contrary, the company law board Carborundum Universal has actually been able to get a sanction for the open offer trigger. Therefore, even though there is no open offer for the company right now, I get the impression that the open offer will come soon. If that mandatory trigger happens, then there will hardly be any float left in the market.

Looking at it from a fundamental perspective, 3M India trades at 30 odd PE multiple, while its same group company is trading far below this range. Taking a call based on the annualized equivalent value which was paid to Winterthur technology, I think the fair value works out to Rs 1860 to be precise. Thus, there is good scope in terms of upside from current levels.

What will happen if the company does not get that clearance of open offer? The stock might correct by 8-10%, but that is the maximum downside for this particular stock. In terms of dividends, Wendt India paid Rs 25 last year. Therefore, this is one stock that should warrant portfolio weight from longer term perspective. Thus, we are very aggressive in suggesting that one should definitely go for a portfolio bet for this stock.