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1. Ashish Kila
Perfect Research

2.  Our Chairman - Mr. R.A. Kila
 Perfect Research Team

3. Delisting Deadline – the right noises being made
 What has changed from last year
Old Vs New Takeover Regulations
 Current delisting cases
 Delisting Bubble– what burst it? –
Highly anticipated candidates Opt for offer for Sale
 Our learning..2 themes
 1st Companies with promoter holdings >85 % and valuation comfort
 2nd MNC’S bullish on Indian business and heavy capex lined up
3

4.  In 2010, SEBI came out with norms saying government firms
should have a minimum public shareholding of 10 per cent
and the private companies 25 per cent. These guidelines were
to be complied within three years.
 While the private companies have to meet norms by 3rd June,
2013, for PSUs the deadline is 8th August, 2013.
 As we seen only a few PSU are left for compliance. So, the
chances of extension are very less.
 In Recent interview SEBI Chairman Mr. U.K. Sinha said that
India Inc has no choice but to comply with minimum public
shareholding norms of 25 per cent by June 2013.
4
(LINK)
(LINK) (Link)

5. (Source : Ace Equity)

6.  Delisting Deadline – the right noises being made
What has changed from last year
Old Vs New Takeover Regulations
 Current delisting cases
 Delisting Bubble– what burst it? –
Highly anticipated candidates Opt for offer for Sale
 Our learning..2 themes
 1st Companies with promoter holdings >85 % and valuation comfort
 MNC’S bullish on Indian business and heavy capex lined up
6

7. 7
Old VS New Takeover Regulations

8.  After open offer, if the acquirer crossed minimum public
shareholding of 75%
◦ Then the acquirer had the option to directly get it delisted
◦ Or bring the shareholding down to 75% of issued capital of
the target company
 E.g. : Styrolution ABS (India) Limited
 Link: http://www.sebi.gov.in/cms/sebi_data/commondocs/act15a_p.pdf
8

9. 9
 Subsequent to completion of offer, the acquirer and PAC may also
exercise the option of delisting the shares of target company
following the procedures stipulated under SEBI (Delisting of equity
shares) Regulations, 2009 subject to various factor including the
financial position of acquirer and the PAC, prevailing market and
economy conditions, market price of Target company and regulatory
framework of delisting.
 Link - BSE

10.  After open offer, if the acquirer holding crosses the 75% of total
Issued capital of the company
◦ It is compulsory for acquirer to bring shareholding down to 75%
with in one year
◦ Acquirer cannot delist directly without bringing shareholding to
75%
E.g:- Gujarat Gas limited, Thomas Cook (India) Limited
Link: http://www.sebi.gov.in/cms/sebi_data/attachdocs/1316778211380.pdf
10

11. 11
In the event that post offer shareholding of the Acquirer and PAC in the target company exceeds
the maximum permissible non – public shareholding under securities contract (Regulation) Rules,
1957, as amended (SCRR), the Acquirer undertake to reduce its shareholding to the level
stipulated in the SCRR within the time and in the manner specified in the SCRR and the listing
Agreement. Link - BSE
The acquisition of 24.17 % of the eligible paid up equity share capital of TCIL and stock options, as
eligible pursuant to the SEBI( SAST) Regulations, under this offer, together with the equity share
being acquired under SPA, will result in the public shareholding in TCIL falling below the level
required under listing. To the extent the post offer holding of the Acquirer in TCIL exceeds the
maximum permissible no public shareholding under securities contracts (Regulations) Rules, 1957,
as amended (SCRR) the Acquirer undertake to reduce its shareholding to the level stipulated in
the SCRR within the time specified in the SCRR and the listing agreement. Link - BSE

12.  Delisting Deadline – the right noises being made
 What has changed from last year
Old Vs New Takeover Regulations
 Current delisting cases
 Delisting Bubble– what burst it? –
Highly anticipated candidates Opt for offer for Sale
 Our learning..2 themes
 1st Companies with promoter holdings >85 % and valuation comfort
 2nd MNC’S bullish on Indian business and heavy capex lined up.
12

14.  APW designs and manufactures standard and customized racks and
enclosure, particularly for IT and telecom firms.
 Promoter-Schneider Electric India holds 75% of its stake.
 Incentive to delist:
 Legally not obligated to delist as public holding is 25%.
 Promoter on acquisition spree in India and almost all acquisitions were
privately held companies or particular businesses to be kept private.
Examples of previous acquisitions:
◦ Mumbai-based Zicom Electronic Security Systems (2010)
◦ Bangalore-based Conzerv Systems (2009)
◦ Bangalore-based Meher Capacitors (2009)
◦ Chennai based S&S Switchgear (2000)
◦ Nashik based Crompton Greaves Low Voltage division (2000)
14

15. APW Promoter
(Holding 71.3%)
Schneider
(Acquirer
Holds 75%)
Non Promoter
Holds 15.3%
Public
Sharehoding
(28.7%)
SH1 SH2 SH3
15

16. 16
No.of
Shareholders
FII&DII 0 0
Body'sCorporate 82 8.30%
Individualshareholders(nominal
sharecapital>1lakh)
10 3.65%
Total 57 11.95%
SmartInvestor % Shareholder'sholdingmore
than1%shares
(asonSep-2012)
GlobeCapitalMarketLtd 113,946 1.88%
APW ElectronicsGroupLtd 169,211 2.80%
Total 283,157 4.68%
No.ofshares
%ofshares
held
Promoter holding 75%
Required for Delisting 15%
3.05%
(15%-11.95%)
Retail (Ex smart investors & NRIs) 10.20%
30%
(3.05%/10.25)
Required from retail
Percentage of Retail tender required

17.  Note:- Excluding Rajasthan Global Securities Ltd and Globe
Capital market Ltd all other are earlier promoters of the
company.
Percentage public holding in more than
1% category
Dec-11 Mar-12 Jun-12 Sep-12
APW Electronics Group Ltd 6.67% 6.67% 6.13% 2.80%
Globe Capital Market Ltd 1.66% 1.88%
M Rutty & Co. Ltd 2.51% 2.51%
Rajasthan Global Securities Ltd 1.12%
Markarand Ashok Kunte 1.09%
Elijah Aaron Elias 1.24%
Sarojini Ashok Kunte 1.30%
Sudhir Seth 2.35%
Total 15.16% 11.96% 6.13% 4.68%
No. of shareholders 6 4 1 2
17
Hints of
Dispersion

18.  Promoters start dispersing holdings between Jan’12 to Jun’12 after
announcement of delisting.
 However, the quantity doesn’t get distributed in retail rather from the
top 300 shareholders list, once can gather that first 40 shareholders
(excluding promoters) would be sufficient to make this delisting
successful.
18

19.  SEBI is getting strict on delisting where price of delisting seems
fixed as in case of Nirma Limited.
 Promoters would like to leave a little premium on the table.
 The Average traded price in APW during dispersion period is Rs.
220/shr.
 Shareholders who bought these shares at Rs.220 ought not to bid at
Rs.195 per share and make losses.
19

20.  Total number of Shares required for delisting - 9,07,200 (15%)
 Votes casted in postal ballot – 8,72,415 (14.42%)
 Shareholders who have bothered to participate in postal ballot
process will definitely participate in delisting process.
20

21.  In Indian Corporate history, only TTK Prestige limited did not take
the action on delisting process after passing resolution from
Shareholders. But it was under the old delisting guidelines in which
there was no time limit for taking the action on delisting process
after passing special resolution from shareholders. (Link)
 In APW Case, it is under new delisting regulation and here the time
limit is one year for taking the action on delisting process otherwise
new special resolution will be required to pass from
Shareholder.(Link)
21

22.  APW is available at a market cap of Rs.123 cr and an EV of about Rs.136 cr.
 FY12 revenue were Rs.100.34 cr, while there was a loss of Rs.5.78 cr at the
PAT level. So it looks the valuations expensive.
 Prior to the acquisition, however, the company had PAT of Rs.9.21 cr in FY09
and Rs.5.4 cr in FY10.it shows that company has the potential.
 The promoters’ holding is 75%.and if delisting fails price will come down
drastically because promoter have no legal compulsion.
 As per our talk with company secretary and Merchant Banker we haven't
been able to get any update why the reverse book building process hasn’t
been initiated yet?
22

23.  The company was engaged in the manufacturing and marketing of
Vanaspati, bakery shortenings, refined and filtered edible oils and
other FMCG products.
 The company sold its core edible oils business - along with its
manufacturing plant on slump sale basis for Rs. 221 cr in Feb-12.
 Of which the company distributed Rs. 44 cr as dividend.
 Promoters announced delisting in Sep-2012.
 Incentive to delist:
 Core business sold to exit from the business.
 No intention of entering into another business.
 Company holds Rs.136 cr of net cash in accounts till March-12.
(Current Market Cap – 107 cr)
23

24. 24

25. 25

26.  The Shareholders in more than 1 % category are likely to be related
to promoters because they also holds substantial holding in Other
promoter group company i.e. Amrit Corp Limited.
26

27.  From shareholding pattern it is clear that delisting is easily doable,
as smart investor are sufficient to get 90% of holding.
 Previously promoters have shown their generosity by paying fair
amount of special dividend of Rs. 60 per share after slump sale.
However, this doesn’t guarantee that payoff would be good in case
of delisting too.
 The Share is available at floor price Rs.142.5,we may expect some
premium from this level (to avoid lawsuits from minority
shareholders like in Nirma ltd delisting)
 Also at this price it seems that there is little to lose like Binani
Cement, you may get a small premium on your cost of holding
(Binani – floor 82, investment at 81 and delisting price – 90Rs )
27

28.  Nirma ltd. has announced its delisting on October 2010. The
company held 77.17 % of equity paid up-capital & company required
12. 83 % equity for delisting.
 But Minority shareholders complained to the regulator and stock
exchanges that the promoters had acquired a large number of the
shares through persons acting in concert before the offer opened,
and tendered them subsequently to complete the delisting process
successfully.
 As a result the regulator withheld the delisting of the company's
stocks as it probes a possible violation, alleging that the delisting
process was not in line with the regulations.(link)
28

29. 29
As we seen 47 Shareholders holds 15.27% which was more
than sufficient for complete delisting. The floor is Rs.235 and
delisting final discovered price Rs. 260 is not at a significant
premium to the floor.

30. At Floor
Price
At 25%
Premium
At 50%
Premium
At 100%
Premium
Price per share
(Rs.) 142.5 178 213 285
Cash Required For
Delisting(Rs. Cr)
27 33.8 40.5 54
Rs. In Cr.
DESCRIPTION Mar-12
Total Debts 0.12
Total Liabilities 145.95
Investments 123.13
Long term investment (MF Units+Bond) 30.02
Short term investment (MF Units) 93.11
Cash and Bank 13.36
Net Cash available with company 136.37
No. of shares 0.74
Cash per share (In Rs.) 185
30

31.  Chettinad Cement Corporation Limited (CCCL) was
incorporated in 1962. Its manufacturing unit located at
Puliyur, Karur in Tamil Nadu commenced production in
April 1968. The company also caters to the
neighboring states of Kerala, Andhra Pradesh and
Karnataka. Besides cement, the company also
produces ready-mix concrete.

32. Smart Investors
No. of
Shareholders
%
FIIs 4 0.01%
DIIs 11 3.24%
Body's Corporate 172 4.91%
Individual shareholders holding
nominal share capital >1lakh
7 0.55%
Total 194 8.70%
Top 4 shareholder's holding-
sufficient to meet delisting
requirement.
% of Shares
Tamilnadu Industrial Investment 3.23%
Original Innovative Logistic (India)
Pvt ltd
1.12%
Elite Coal Terminal Logistics & Service 0.99%
Pertieland Foods Private Limited 0.86%
Total 6.20%
Promoter holding 88.40%
For delisting require another 5.78%
Retail holding Excluding smart
investors & NRIs
2.84%
Required from retail (8.7% > 5.78%) 0%
Sufficient for Delisting

33.  The board has approved the delisting & floor price is set at Rs 540/share
and Indicative Price is Rs.-575 CMP – Rs 800.
 Delisting, very probable: Management holds around 88.5% of the equity
and needs only 5.75% of the equity to delist
 Expected time : The Company announced a proposal to delist on May 15th
2012. However, its been more than four months that they haven’t initiated
postal ballot approval process.
 This again reiterates the risk of investing before postal ballot approval.

34. 34
Company
Capacity
(MMT) Debt EV EV/MT
EV/tonne
(USD) Net profit EV/ NP Sales EBDITA EV/EBDITA EBDITA % ROE NPM
Shree cements 13.5 400 10,106 749 165 209.0 48.4 3,558 958 10.5 27% 10% 6%
Madras cement 10.5 2800 6,094 580 128 353.0 17.3 3,600 657 9.3 18% 13% 10%
India cement 14 2400 5,461 390 86 330.0 16.5 3,865 980 5.6 25% 10% 9%
Prism cement 7.6 900 3,323 437 96 251.0 13.2 3,410 400 8.3 12% 18% 7%
Birla corp 6 -300 1,844 307 68 557.0 3.3 2,300 500 3.7 22% 25% 24%
Chettinadcement 11 1000 3,290 299 66 180.0 18.3 2,060 680 4.8 33% 18% 9%
JK cement 7.4 1100 2,122 287 63 180.0 11.8 2,500 400 5.3 16% 12% 7%
 Comparing similar size companies in the industry, Chettinad trades at $66/ tonne.
 Whereas Madras Cement, with almost equal capacity, trades at $128/ tonne
 Also, new Greenfield projects cost around $160/ tonne.

35. Shareholder'sholdingmorethan1%
shares(asonJune-12)
%ofShares
JKModi 1.24%
Promoter holding 73.60%
For delisting require (90-73.6) 16.40%
Share tender Required from retail 3.24%
Retail holding excluding Smart
Investors & NRI's
13%
Percentage of Retail tender required
(3.24/13)
25%
SmartInvestors
No.of
shareholders
%
DII(MFs/UTI/Insurance) 8 0.02%
Body's Corporate 268 5.27%
Individualshareholders holding
nominalsharecapital>1lakh
81 8%
Total 357 13.16%

36.  In case of Ricoh India, public holding is well scattered through small retail
shareholders and risk appears more from the part that whether book will be
built or not rather than the discovered price.
Result of Postal Ballot:-
 Shareholder who bothered to participate in postal ballot will definitely tender
its Shares.
 Also mass participation with small holdings will most likely result in
discovered price at high premium.
36
No. of shares % Shares
Promoter Holding 29270370 74%
Non promoter holding 10497791 26%
Total No. of Shares 39768161 100%
Votes in postal pallot by public shareholders 5516003 14%
Require for delisting 6362906 16%

37.  At the time of announcement stock traded at the price of Rs. 46 with
P/B of ~ 2 & currently trading at the price of Rs. 87.5, with P/B or 3.6.
 If delisting not success than stock may correct approximately by 50%.
37

38. 38

39.  Board of directors announced delisting on 4 Sept 2012 at Rs
25 per share, which was 60 % premium to current market
price.
 Promoter holding is 16.04% as on Sep-12 which is reduce to
9.78 % of total issued capital if all outstanding GDR convert
into equity shares.
 Delisting is pre condition for a transaction that promoter
entered with one of FII.
 The % holding of GDR’s after conversion recently in
September quarter reduce from 73.44% to 39%
 We will avoid this delisting and reserve any further
comments 
39

40.  Indo Tech Transformer limited (ITTL), a Chennai Based
Company, was incorporate in 1976.The Company is engaged
in manufacturing of transformer such as power, distribution
and special transformer.
 It is one of the leading transformer manufacturer in southern
India and serve the southern state electricity board . It has
four manufacturing facilities across three locations with total
installed capacity of 7450000 KVA per annum.
 The company derives revenues primarily from sale of
transformer manufactured to state electricity board, EPC
contractors, industries etc.
40

41.  As of 2012, Prolec‐GE International holds 74.35% stake in ITTL.
 Prolec‐GE is a joint venture between Mexico’s Xignux and US‐based General
Electric.
 It is one of the largest transformer manufacturers in the USA, offering a
complete line of transformer products for the generation, transmission and
distribution of electric power with products installed in more than 30 countries.
 Prolec‐GE International acquired 54.35% through share purchase agreement
from previous Promoter of the company and 20% through open offer from
Public Shareholder in December,2008 at Rs.406 per share.
 Now the acquirer announce Rs. 120 per share as indicative price for delisting
of shares which is approx 70% discounted from purchasing price in 2008.
41

42. 42

43. 43

44.  Delisting Deadline – the right noises being made.
 What has changed from last year.
Old Vs New Takeover Regulations.
 Current delisting cases.
Delisting Bubble– what burst it? –
Highly anticipated candidates Opt for offer for Sale
 Our learning..2 themes.
 1st Companies with promoter holdings >85 % and valuation
comfort.
 2nd MNC’S bullish on Indian business and heavy capex lined up. 44

45. 45
 Delisting Bubble- What burst it?
Highly anticipated candidate opt for “ offer for sale”.

46. 46

47. 47
Delisting-First nail into delisting
saga

48.  Fresenius kabi oncology was one of the delisting
candidate with more than 90 % of promoter holding.
 News for delisting were rampant in the market too.
 At that time valuation was so high, stock traded at ~ Rs
160 with ~ PE of 45.
 In the mid of ongoing rumors promoters announced “
open for sale” on 30 May 2012 and stock falls ~41 % as
of now.
48

49. 49

50.  Delisting Deadline – the right noises being made
 What has changed from last year
Old Vs New Takeover Regulations
 Current delisting cases
 Delisting Bubble– what burst it? –
Highly anticipated candidates Opt for offer for Sale
Our learning..2 themes
 1st Companies with promoter holdings >85 % and valuation comfort
 2nd MNC’S bullish on Indian business and heavy capex lined up.
50

51. 51
Our learning..2 themes
1st Companies with promoter holdings >85 % and valuation comfort
MNC’S bullish on Indian business and heavy capex lined up

52. 52
Campany Name
Foreign
Promoters
Holding
Holding
Required For
Delisting
TTE PE
BOC India Ltd. 89.48% 5.26% 34.26
Disa India Ltd. 86.49% 6.76% 18.25
Elantas Beck India Ltd. 88.55% 5.73% 41.46
Kennmetal India Ltd. 88.16% 5.92 31.31
Styrolution ABS(India) Ltd. 87.33% 6.34% 25.1
Note;- Sah Petroleum foreign promoter Holds 62.05% and Indian
promoter holds 24.84%.

53.  Styrolution is the only one of the key players dedicated entirely to
styrenics, and a strong leader in the market.
 It holds global number one positions in styrene monomers (SM),
polystyrene (PS), styrene-butadiene block copolymers (SBC), other
styrene-based copolymers (SAN, AMSAN, ASA, MABS) and copolymer
blends, and a number two position in acrylonitrile butadiene styrene
(ABS). Styrolution is the leading global styrenics supplier with a focus on
styrene monomers, polystyrene, copolymers, and ABS.
 As a joint venture of BASF and INEOS, Styrolution combines the key
styrenics assets of two of the biggest chemical companies in the world.
 The company provides styrenics applications for many everyday
products across a broad range of industries, including automotive,
electrical/electronics, building and construction, household appliances,
toys/sports/leisure, packaging, health care and diagnostics.
53

54.  The promoters made an open offer on 20th Oct’11 as per Old
Takeover Regulation. However, the promoters also had the option to
pay Rs 120 per share less – as per new takeover code if they had
made the offer after 22nd Oct 2011 (as per our understanding)
 We think promoters chose the old takeover regulation to avail the
option of delisting when their holding would cross the minimum level
of public shareholding after open offer
 In contrast, new takeover regulation do not give the option to delist it
shows clear intention of the promoter to delist
54

55. (Link)

56.  On one side Styrolution wants to delist its shares.
 On other side another promoter of Styrolution (BASF) wants
to dispose of its stake.
 If delisting not made so there is another chance of open offer
when BASF sell its stake to other party other than Ineos.
 Also Ineos is mandated to make open offer for Styrolution
shareholder if they acquire shares through inter-se transfer
promoter from BASF within 3 Years from the date on which
they entered into contract with BASF.
56
(Link)

57. 57

58.  Promoters need only 20% of Retail shareholders to tender
 No single retail shareholder holds more than 1% of total holding
58
SmartInvestors No.Shareholders %
FIIs 7 0.66%
DIIs 10 1%
Body'sCorporate 287 2.07%
Individual (>1lakhsharecapital) 11 1.13%
Total 315 4.86%
Promoterholding 87.33%
Delistingrequirement 6.34%
1.48%
(6.34%-4.86%)
RetailHolding
(Exsmartinvestors&NRIs/CM)
20%
(1.48%/7.49%)
RetailsSharetenderrequired
7.49%
%ageRetailtenderrequired

59.  MNC expanding – Increasing capacities by >30%
◦ Company has already made capacity expansion from
60,000 TPA to 80,000 TPA in 2011
◦ Plans to further augment the capacity to 110,000 TPA by
the end of CY2012.
◦ Capacity expansion for Styrene-Acrylonitrile (SAN) from the
existing 60,000 TPA to 100,000 TPA too is in process.
59

60. 60

61. 61
 Styrolution is expected to post revenue CAGR of 15% in next three
years, given its expansion plans
 The company is backed by a strong and well funded MNC
 Promoter has shown intent to delist and other promoter subsidiaries
are also private, which makes a strong case for delisting
 MNC, delisting candidate, available at 21x FY11 EPS and 14x
EV/EBITDA
 Stock can steadily compound even if the delisting doesn’t go through

62. Note:- No disclosure in annual report regarding provision of contingency
which was 9% of net profit of FY 2011.

63. 63

64.  Sah Petroleum ltd is one of the leading manufacturers of industrial
lubricants in India. The company manufactures wide range of industrial and
automotive lubricants, specialties and process oils under the brand name of
IPOL.
 Navis Capital Partners holds majority stake around 62% , while Indian
promoters hold around 25 %.
 Navis acquired stake through preferential allotment at 27 Rs and then
through open offer at 48Rs.
 Price around Rs 27, mcap ~ Rs 120 cr, Cash ~ Rs30 cr. and investments in
short term MF ~ Rs 45 crores and negligible debt. EV ~Rs 45 cr. against
EBITDA of ~Rs 30.80 cr. and sales ~Rs 550 cr.
 Concern – Bottom line fluctuates a lot due to currency movements.
64

65. 65

66.  1st There may be chance of delisting because if the same
thing which was bought in 2008 at Rs. 48 is available 40%
discount from that.
 2nd Navis Capital would seek exit because generally fund is
not invested in any company for perpetuity.
 Risk –Indian Promoter it seems could avoid delisting by
converting its classification to Non promoter like in case of
Evreronn.
66

67.  The management looks at Wheelabrator as a big growth
driver. Margins in Wheelabrator products are as high as
30%+.
 In the quarter sep-2012 the promoter holding’s in this
company is 86.49. Could be a delisting candidate in the
coming years.
 The Share currently traded at PE multiple of 18.66 and P/B is
5.11.
 Disa India is very well covered by Mr. Neeraj Marathe in
his Blog
67

68. Abbott Ltd:-
 Extracts from annual report of Abbott ltd.
 Abbott limited holds 74.99% in Abbott India ltd.
 Link: http://media.corporate-ir.net/media_files/irol/94/94004/Proxy_Page/AR2011.pdf

68

69. BASF Group:
Extracts from annual report of BASF Inc.
 BASF group holds 73.99% in BASF India limited.
Link: http://www.basf.com/group/corporate/en/function/conversions:/publish/content/about-basf/facts-
reports/reports/2011/BASF_Report_2011.pdf
69

70. 70

71.  Kokuyo Co. limited
 Extracts from annual report of Kokuyo co. ltd.
 Kokuyo Co. Ltd. holds 63.97% in Kokuyo Camlin
limited.
 Link:
 http://v4.eir-parts.net/DocumentTemp/20121022_092652697_sb0t2rjp3eoqkhzsexv4yyux_0.pdf
71

72. Clariant Chemical Limited :-
 Extracts from annual report of Clariant Chemical limited.
 Clariant chemical limited holds 63.4% in Clariant
chemical (India)limited.
Link:
http://clariant.com/C12575E4001FB2B8/vwLookupDownloads/AnnualReport_Clariant_2
011.pdf/$FILE/AnnualReport_Clariant_2011.pdf 72

73. 73
Its always better to take a basket bet to reduce risk and
dependency from performance of Individual candidate.

74.  For a matter of practice we usually invest after getting
the postal ballot approval from shareholders and sell
before opening of reverse book biding process to avoid
event risk.
74

75. 75

76. You can reach me on :
 asishkila@gmail.com
 +91-9999751327
Perfect Research
T-24A Green Park Extn.
New Delhi – 16
Blog: http://perfectresearch.blogspot.in
Twitter: @ashishkila
Please feel free to contact me with any suggestions & ideas
regarding delisting.
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