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Suresh Krishnamurthy

CHRYSCAPITAL'S offer to shareholders of Shriram Investments and Shriram Transport Finance can be given the go-by. The identical offer price of Rs 35 to the shareholders of both companies is at least 33 per cent below the prevailing market price.

ChrysCapital is making the offer post the acquisition of a stake in excess of 15 per cent through a preferential allotment in January. The offer is devoid of value for the shareholders.

The stock price of these two firms has risen from below the offer price in January to the current levels. In January, ChrysCapital acquired major stakes in three Shriram Group firms — Shriram Investments, Shriram Transport Finance and Shriram Overseas Finance.

All three are engaged in the same line of business — truck financing — and also are listed. The stock of Shriram Overseas Finance is, however, infrequently traded and the open offer by ChrysCapital to the shareholders of Shriram Overseas Finance is at Rs 21.

Shareholders can hold on to their stakes in Shriram Investments and Shriram Transport Finance. The stocks are under-valued based on their fundamentals and growth potential. The return on net worth of these two companies is healthy and profit growth during first three quarters of FY 2005 has been impressive.

The stocks also offer attractive dividends, which, too, could grow from current levels. Their business model has been vindicated with a number of institutional investors such as Citicorp and UTI Bank picking up stake in these two firms.

With the prospect of merger of the three truck-financing ventures, there is added incentive for shareholders to hold on. The offer document indicates that the promoter would ensure merger of the three firms within an agreed time frame. This restructuring, which would be favourable from the corporate governance perspective, could unlock further value for the shareholders.

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