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Suresh Krishnamurthy

SHAREHOLDERS in Prabhat India can accept the offer made by Suraj Prakash Bhagat and associates. The offer for 20 per cent of the paid-up capital of Prabhat India is being made at Rs 20 per share.

Prabhat India is into finance and investment activities. The stock of Prabhat India is listed only in Calcutta Stock Exchange.

The offer price appears to be lower than the intrinsic value of the company. The net current asset per share of the company at end-March 2002 was about Rs 80.

Given that net current assets per share is likely to consist of cash and other claims, the offer price appears to be much lower than the stock's intrinsic value. However, since latest financial details are not available, investors have no way of knowing if the value still continues to exist.

In addition, if the claims are difficult to enforce, the intrinsic value may be much lower than the net current assets per share as of March 2002.

Important, the stock is infrequently traded at the exchange. In this context, a price of Rs 20 per share appears reasonable compensation for investors.

The holding of non-promoters in the company is about 40 per cent. In this context, only proportionate acceptance is likely and therefore retail investors should tender their entire holdings to derive maximum benefit. The offer opened on July 25 and closes on August 23.

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