• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

S. Vaidya Nathan

SHAREHOLDERS of OCL can tender their shares and participate in the buyback programme announced by the company. The buyback is being made at Rs 80 per share through the tender offer route. This would ensure that shareholders get an assured price of Rs 80 per share in contrast to market-based buybacks where the value is uncertain.

The stock has traded below the price fixed for the buyback for well over two years now. Also, the prospects for a 1.7-million-tonne capacity cement player do not appear attractive in the long run. The consolidation in the cement industry has led to the emergence of three major groups — Grasim, Gujarat Ambuja and Zuari-Italcementi.

This trend would only get accentuated in the years ahead. Relatively small-sized, OCL's leverage in the marketplace may get affected.

Its location has helped, for the eastern market is not in oversupply. Players in other regions with similar capacities have been struggling to stay afloat. OCL also has a presence in refractory and sponge iron.

Despite this aspect of OCL's operations, the stock has generally traded at a low price earnings multiple (PEM) of around five times its per share earnings.

The buyback price is at a PEM of around 10 times its 2001 - 02 earnings and five times its likely annualised earnings for 2002-03. The latter may not be sustainable.

Shareholders can use the open offer to exit the stock and evaluate possible exposures linked to fundamentals in the post-offer period.

Article E-Mail :: Comment :: Syndication

Stories in this Section
OCL: Accet

Copyright © 2003, 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