The Hindu Business Line : Industrial Investment Trust: Reject

SHAREHOLDERS of Industrial Investment Trust should reject the tender offer for acquisition of shares at Rs 40 per share. The market price of Rs 58 (on the BSE) makes the open offer unattractive. It is also not advisable to sell the stock in the market.

The company holds a valuable investment portfolio that could lead to further appreciation in the stock price.

Systematix Group, which is also into financial services, is acquiring the company and hopes to grow it into a leading player in the financial services industry.

Industrial Investment Trust is primarily an investment company. As at end-March 2004, the market value of its portfolio of quoted investments of Rs 7.5 crore had appreciated to Rs 57 crore.

Since then, its stock price has only scaled greater heights. The detailed annual report for the year-ended March 2005 is not available. The letter of offer, however, indicates a decline in the value of investments without any proportionate increase in the value of other assets. This is mainly because of a provision of Rs 24 crore against doubtful loans in FY-05.

The level of provision is surprising since at end-March 2004, aggregate loans and advances were only Rs 18.9 crore.

There is, thus, a question mark over the quality of the financial statements for FY-05. Nevertheless, the market value of quoted investments and liquid assets should be higher than Rs 57 per share.

Industrial Investment Trust also holds stake in buildings of cooperative societies, the value of which was placed at Rs 3.8 crore in the financial statements for FY-04.

The market value of these stakes is not known; it could be substantially higher in the prevailing bullishness in the real-estate market.

Against this backdrop, the intrinsic value of the IIT stock could be higher than Rs 58 per share, suggesting that shareholders could hold on to it for now.

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