AMITBE said:
Thanks for the post, Roneeth.
I'm not quite sure how this development would influence the price action of this counter now.
But for this, GC would be a winner stock with certainty...and it's still good.
After dipping to 260 it's up at 278.
At current levels 269 is stop, and above 284-293 will become strong, if anyone interested.
Can set targets at close above 303-308.
I wouldn't say this is speculative on sheer fundamentals, but yes, things are a bit uncertain.
Regards.
hi amit,
cummins closed at..216.2....on greaves here is smthin...
encl is an article i got from Moneycontrol.com
Greaves Cotton deal setting wrong precedent: Tulsian
DBH International will be acquiring 48.9 lakh shares or 10.35% of Greaves Cotton from Solaris Holdings at Rs 71 per share. Investment advisor, SP Tulsian gives his views on the deal.
2006-02-03 11:54
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DBH International will be acquiring 48.9 lakh shares or 10.35% of Greaves Cotton from Solaris Holdings at Rs 71 per share. The company's stake in Greaves Cotton will go upto 25% now.
Meanwhile, a notice came through from Greaves Cotton to the Exchanges suggesting that Greaves Leasing Finance which is completely held by Greaves Cotton was transferring 28.50 lakh shares of Crompton Greaves at Rs 53 to the promoter company that is holding.
So it is a transfer of a very large chunk of listed Crompton Greaves shares at Rs 53 when the current prices are more than Rs 900 to the promoter company.
So now, all eyebrows are raised because that is potentially taking away value to the tune of Rs 250 crore away from the company to the promoter company.
Investment Advisor, SP Tulsian has been studying the deal, and says that he is quite dissapointed with the deal, and that it is definitely prejudicial to the interest of the shareholder and to the interest of the company.
Excerpts from CNBC-TV18's exclusive interview with SP Tulsian:
Q: Are you disappointed with the transfer?
A: I am quite disappointed. This is setting a wrong precedent. How can one take away Rs 250 crore, and transfer the benefits only to the promoters. I think this is totally wrong. If these kinds of things start happening, nobody will be able to take an investment call or a valuation call on any company. This is a wrong move on part of the promoters of the company.
Q: Could you lay out how Greaves Leasing Finance acquired these Crompton Greave shares? Was it held in their books at Rs 46 and the promoters did not transfer it to that company?
A: If one sees in the past, Crompton Greaves and Greaves Cotton, both were into trouble and they were making losses. About three years back Greaves Cotton held these shares in their book which they subsequently transfered to Greaves Leasing Financial Limited at Rs 46 which is 100% subsidiary. Once both these companies become healthy and have started making profits, they are transferring their entire chunk of 28.56 lakhs shares which are now held by Greaves Leasing Finance Limited to the promoters of the company.
In a nutshell if one sees the overall transaction, first these shares were transferred from Greaves Cotton to 100% subsidiary of Greaves Cotton, and now once that company has become very healthy the valuations have run upto 6 or 8 times, the shares are getting transferred to the promoters at Rs 53 which has no justification.
In the past Greaves Cotton has borrowed huge money and they have been paying interest on that borrowing which has effectively used for acquiring these shares. Once the share prices have run up so much the shares are being transferred to the promoters at Rs 53.
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Q: Legally or through the exchanges can any action be taken against the management or the promoters for doing that?
A: Under section 293-1A, it is prescribed that any transfer of fixed assets needs shareholders' approval, but these are not truly forming fixed assets and so the investments can easily get transferred without shareholders' approval.
The audit report or the corporate governance says that nothing has been done which is prejudicial to the interest of the shareholder and which needs to be examined by the board, by the committees as well as the auditors of the company. We will have to see how they report that when they present their annual accounts to the shareholder of the company for FY06 because it is definitely prejudicial to the interest of the shareholder. Since the value which will get hived off from the company to the extent of Rs 250 crore translates into Rs 55 per share, which is infact an erosion or loss to each shareholder of the company of Greaves Cotton Limited. So this is definitely prejudicial to the interest of the shareholder and to the interest of the company.
