Once in a while, the market throws up relatively risk-free opportunities. Delisting of shares and mergers of companies are some of such safe trading opportunities. However, in many cases, the insider makes the most of the money. Normal investors do not get a chance to enter the trade till there is very little left on the table.
There are, however, some relatively risk-free bets. Currently, there are two an investor can capitalise on — Thomas Cook and IVRCL — for different reasons to be attractive.
In the case of Thomas Cook, the parent company is in financial mess and has few good assets in its books to come out of the fix. One such asset is the Indian arm, listed on the bourses. The parent holds 77 per cent in the company and wants Rs 1,716 crore for this. This works out to Rs 105 a share. Thomas Cook (India) closed at Rs 71.25 on Thursday.
Any acquirer of the stake from the parent company will have to make an open offer, which will result in delisting of the stock. The parent company is reported to have appointed a merchant banker and legal consultant to sell its stake. Thomas Cook, thus, offers a relatively safer bet to cash on.
The second, though a comparatively riskier investment bet, is south-based infrastructure major IVRCL. There is a hostile bid on the company by media baron Subhash Chandra, through his Essel Group of companies. The group has already acquired more than the present promoter, Sudhir Reddy. From the latest available information, Essel holds 12.3 per cent in the company, as compared to 11.18 per cent held by the promoters.
The promoter of IVRCL is short on cash and is in talks with various sources, including the company’s joint venture partner, to fund his acquisition of shares. In other words, both parties will be stepping over each other to increase their stake. Reports, later denied, say the Essel group had made an offer to buy out the promoter at Rs 105. IVRCL was last traded at Rs 73.90 on Thursday.
IVRCL itself is not in the best of financial health, restricting the promoter’s ability to raise capital. The company’s profit has seen a sharp decline from Rs 332.5 crore in 2008 to Rs 29.46 crore in March 2011. Debt during the same period has zoomed from Rs 1,725 crore to Rs 4,305 crore. Essel appears to be having an upper hand in this battle, given its deep pocket and availability of other sources of income to fund the takeover.
IVRCL offers a short term opportunity but the fluctuations can be wild as the two parties slog it out to increase stake. Uncertainty will make the stock very volatile in the near future.
Though both the stocks have run-up, there is still enough steam left in them.