Sulzer India. Will delisting happen?

Sulzer India announced its plan to delist the shares from the stock exchanges. Sulzer, Switzerland-based parent company, an 80% shareholder of the company has proposed to acquire the remaining 20% equity shares of the company through an offer and intention to voluntarily delist the equity shares of the company from all the stock exchanges in India.

Read my initial report about Sulzer India here (Specifically read my Note of Caution section)

The company is offering 870Rs/share as an initial offer to its shareholders which will value the company at around 8 times its expected EPS of 110Rs by FY10 March. The company in 2006 also had tried to delist its shares but failed.

Will the delisting happen this time?

The company is really in a Catch22 situation now. I would say this case applies to most of the MNC’s listed in India who has high promoter stakes. Even though MNC companies want to increase their Indian operations, most of them would like to have greater control in their day to day and financial operations.

Sulzer India , An MNC going cheap?

Key Investment Highlights

• Sulzer India is a subsidiary of Sulzer Limited, Switzerland, is a part of Sulzer Chemtech Business Unit of Sulzer Corporation
• Sulzer Ltd holds 80% stake in this company.
• Very low equity of 3.45Cr
• Highly conservative and quality management.
• Good dividend paying track record (350%)
• March FY10 EPS will be in the range of 110Rs.
• At 800Rs this MNC stock is trading at a PE of less than 8 and a Market cap of 280cr.
• Debt free company with a cash of around 55Cr in its books as on March 2008.
• One of the major players in the Indian market who can provide technological solutions for Mass transfer technology requirements for a wide variety of industries like Refineries, Petrochemicals, Chemicals, Gas Processing, Fertilisers etc.
• The company also addresses the export market mainly the growing demands in the Asia Pacific region through Sulzer Chemtech channels in the regions.
• The company should do well with the progress of Indian economy and in general with the progress of Asia pacific region.

Introduction

The key investment highlights listed above are too good to believe which makes one think why this company is still trading at these ridiculous valuations. So let me start this post with a caution note and all the grey areas when you invest in this company.