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Tuesday, October 12, 2010

Corporate Actions Opportunity - Murudeshwar Ceramics Ltd Rights issue

I have been looking for opportunities based on corporate actions and this one seems to be worth mentioning.

Murudeshwar Ceramics Ltd rights issue offer.
Ratio: 1:1
Current Price: Rs. 39.35/-
Offer Price: Rs. 20.00/- (Including face value of Rs. 10/-)
Record Date: Oct/20/2010

Normally, the price is expected to fall to account for the new shares, but looking at the history and my earlier experience with rights issue, that's not the case always. So if the current price maintains after the new shares are allocated, the profit potential of is ~50%. And since the potential is high, it offers a buffer in case price falls. There is no guarantee that price will remain at Rs. 40/- level (or even near that level).

Based on IndexoMeter, I have been converting from securities to liquid assets and currently hold around 25% in cash and this might provide an opportunity to deploy some of the cash for a short period. I am planning to invest in this opportunity. Will keep you posted on how it works out.

10 comments:

rajsmusings said...

Hi George,

I have been following your blog for some time now and share your interest in arbitrage opportunities. I am a newbie though.
Currently am tracking 3 opportunities and would love to hear you view on them.
1. EIH, upcoming rights issue and a possible buyback following that.
2. Binani Cement buyback and de-listing.
3. Pioneer Distilleries buyback.

Regards
Raja

George said...

Hi Raj,

I visited your blog few days ago and I bookmarked it.. you have a unique blog and its about one of the things I love - Gardening/Planting!! I have a small vegetable gardan of my own. :-)

I havent been following the ones you posted. Thank you for posting it.. will keep an eye on it.

EIH: I dont think the final details of the rights issue is published yet. ITC non commited to buying into rights issue. Will be interesting to see how this one goes.

Binani Cement: The current price is Rs. 93/. and the delisting offer price was Rs. 90/- from the accouncements it looks like the tender offer was set to expire on Aug 10th. Couldnt find details on how that buyback offer went. This might worth watching to see what kind of delisting offer they come up with. And especially if the market along with this stock tanks after the offer is made.

3. Pioneer Distilleries buyback.
Current price is Rs 83/- and the buy back offer price - Rs. 101/- this sounds good but since the offer seems to be good, acceptance % might be less. Also, looks like the record date was Sept end (couldnt confirm). So we may not be able to participate in this offer now.

George.

rajsmusings said...

Hi George,

Thank you.

EIH: Like you said, they are yet to come up with details. But a rights issues is declared and there could be an opportunity if any one of the existing major share holders ITC/Reliance crosses the limit of 15%. Then they have to go for an open offer for 20% of the shares.

Binani Cement: What you are referring to was an open offer for just 20% of equity at Rs. 90/- which is now close. But after that they have declared an intent to delist for which no price updates have been given. But there are rumors that it could be in the range of Rs.110-120/-

Pioneer: Only 40% of the total equity is with public and the open offer is for 20%. So, at the minimum acceptance will be at least 1 for every 2 tendered. record date is from Nov. 10 to 29th.
Would love to hear your views further.

Regards
Raja

George said...

Hi Raja,

Sorry, tied up with few items now..

On Pioneer, eventhough I couldnt see it on the site, I think i saw somewhere that sept end was the record date, we need to confirm that. Nov. 10 to 29th is the date when the buyback offer is open based on the earlier record date. I will check the remaining once asap.

Thank you,
George.

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