The Hindu Business Line : Sangam India: Reject

SHAREHOLDERS need not tender their shares in the open offer for Sangam India. The offer price of Rs 47.1 is below the current market price. Holdings in the stock can be retained for the time being. The company has recorded an impressive performance in the July-September quarter. Its Rs 400-crore expansion plan is also on track. The full benefits of the expansion should kick in by FY-08.

Background to the offer: Sangam India had made a preferential allotment to the acquirers, as a way of partly funding its expansion plans. The acquirers are making an open offer. The acquisition has been made purely from an investment angle and there is no change in either the management or the operations of the company, because of the acquisition.

Prospects: Sangam India is a Rs 300-crore textile company and is among the larger players in the Polyester/Viscose (PV) dyed yarn segment. It makes yarn of coarse count, which is used for suiting material. Sangam India caters to big players in the suitings business such as Grasim, Siyaram and Rajasthan Spinning. It also produces its own suitings brands, "Sangam" and "Anmol" and exports about 15 per cent of its yarn production.

Sangam India has been able to maintain margins at 15 per cent, despite pressures on the pricing front. The company is expanding its spinning and weaving capacities. It is also diversifying into cotton yarn production. This augurs well, as there is now a greater demand for cotton yarn. Equity expansion is however, likely to strain growth in per share earnings till such time new capacities go on stream.

Offer Details: Enam Financial Consultants is the manager of the offer. The offer closes on October 24.

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