Financial Daily from THE HINDU group of publications
Sunday, Dec 15, 2002
Financial Daily from THE HINDU group of publications Sunday, Dec 15, 2002 |
|
|
|
|
|
Investment World
-
Stocks Markets - Recommendation Nalco: Uncertainty ahead Suresh Krishnamurthy
Recommendation: In the backdrop of substantial uncertainty over the plans for disinvestment through the strategic sale route, investors can utilise the present up trend to pare down their exposures to the stock. However, if the strategic sale to a bidder is firmly back on the agenda then investors can consider buying into the stock. The stock of Nalco initially received a boost when the programme for disinvestments through the strategic sale route was unveiled. The value of the bauxite assets of Nalco is expected to be substantial. This will be reflected in the price offered for Nalco by the bidder. Since the bidder will have to come out with an open offer, the upside to the stock will be considerable. However, the disinvestments through the strategic sale route have been embroiled in a controversy since then. Official sources have indicated that the due diligence process in the case of Nalco would start within a reasonable time frame. Still, it is possible that the strategic stake sale may take a while coming. This will be so especially if the company is classified a natural asset company. In addition, strong opposition from various political quarters and employees is also foreseen. Some of the bidders also appear to have withdrawn from the process. These factors suggest holding on to the stock awaiting gains linked to strategic sale may not be prudent now. Only an ADR offer appears imminent now. That however will not be enough to sustain valuations. This is especially because the stock price is trading much above the value that justified by its fundamentals. At Rs 97, the stock trades at a multiple of 15 times the earnings per share for the year ended March 2002. Investors can enter when valuations decline or when strategic sale is back on the agenda. Suitability: The dilly-dallying disinvestments process has already reflected in the relatively higher volatility of the stock in the last 12 months compared to earlier periods. The trend is likely to continue till the strategic sale decision is decided one way or the other.
Send this article to Friends by
E-Mail
|
Stories in this Section |
|
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription Group Sites: The Hindu | Business Line | The Sportstar | Frontline | Home |
Copyright © 2002, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line
|