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Mergers & Acquisitions
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BAJAJ HINDUSTAN&
PARTAPPUR SUGARS
Group 4Navin Bafna Preet SabharwalHardik DoshiSajeev Rao
The Deal………..
30th August 2005 Bought 55% though SPA @ Rs55/- per share Bought another 4.81% through open offer @
63.50/- per share Plant capacity 3200 Tcd Located in eastern UP
VALUATIONS
Market Price of the share using the SEBI formula Rs 56.80/-
Book Value Rs 13.47/- EPS for 2005 was negative Rs -1.62/-
Valuation in Sugar Industry
Capacity Replacement Cost per unit Replacement Cost (Crores)Sugar (TCD) 3200 200000 64Alcohol (KLPD) 25 250000 0.625Total Cost 64.63Total Debt 5.18Net cost 59.45Total no of shares 3600000Cost Per share 165Discount Replacement 20%Net Price per Share 132
Book Value = Rs13.47 Replacement Cost = Rs 132
EPS Last 3 Yrs = Rs 1.2
Industry PE = 11.6
Value = 13.92 Market Price = Rs 56.8
Acquisition Cost = Rs 55.70
Synergy…………… Most of the big capacities are in West UP
Pratappur was in eastern UP
Most of the government factories were in eastern UP
The idea was to get relations with farmers before hand
After 14 months Shishir Bajaj bid for 11 east UP factories
It gives him direct route to Bihar and other states
The Travelling time between Agricultural land and factories is a major factor in Sugar business
Only 1/5 of the possible land was under efficient sugar cultivation in East UP due to government inefficiency
DCF valuation not Jusitified
As the revenues coming from sugar sell are market priced
The sugar cane prices are also uncertain Sugar cane prices comprises more than 70% of
the total costs
Business Intelligence
Capacity Expansion
SS 2008
-3 new Sugar mills with 34,000 TCD Capacity taking total capacity to
SS 2006 SS 2007 40,000 TCD 1 Mill, 3200 Cap expanded
- New Distillery of 160 TCD to 6000 TCD KLPD
- Exportable Co-gen 15 MW
210
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Company Overview 1. BHSIL among India’s top 5 Sugar manufacturers
2. Capacities in place:
Sugar : 40,000 TCD (4 Units, all in Eastern UP)
Distillery : 160 KLPD
Co-Gen : 15 MW Exportable surplus
6. Ideally positioned to service sugar deficient North Eastern / Eastern markets, where
Sugar realisations are marginally higher
7. Synergies with parent which has mills in Western & Central UP
8. Close proximity to Kolkata provides opportunity to export sugar, if reqd.
9. Support from multilateral agencies like IFC through subscription to FCCBs indicates
confidence in business model and the company management
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Thank You
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