Wartsila Parent Open Offer On At Rs 120/Share

Wartsila Corporation's open offer for acquiring an additional 49 per cent stake in its local subsidiary opened today at Rs 120 per share.

While still subject to necessary statutory approvals, the offer envisages consolidation of stake by the US parent to 100 per cent and may result in delisting of Wartsila India from the indian bourses, the company said in a statement here.

"The further consolidation of wartsila corporation's holding in wartsila india will enhance its competitiveness with greater management focus and technology absorption. This is a long-term process, given the competitive nature of the business. Wartsila Corp has thus decided to provide an opportunity to the public shareholders to make an appropriate choice under the prevailing market conditions," it said.

The open offer presents a good exit route for shareholders since it has been moving between Rs 60 and Rs 80 for almost the past year. Before the announcement of the offer, the share hovered around Rs 67, which is an eight-year low.

The scrip had touched Rs 165 in February this year, although that was primarily on the back of order booking in the Balaji-Samalpatti power project and in Tata Power's Belgaum project.

However, given the bleak prospects for the company's business this year, the stock lost almost half its value in less than a month to Rs 75.

The stagnation in the company's customer segments of cement and chemicals is reflected in the stagnant order book position of Rs 68 crore as compared to the position at March 2001.

Compared with year ago figures, order book is down almost 65 per cent. Further, any substantial impact of higher order intake (if any) in the latter half of the year will be visible only in FY02.

In the last quarter ended June 2001, Wartsila India's topline grew 5.76 per cent at Rs 73.40 crore grew. Net profit declined 2.78 per cent to Rs 3.5 crore.

The only redeeming factor about Wartsila's results is that it has been able to maintain its margins at the 8 per cent level, despite the stagnation in the industry. Thus, it has been consistent in achieving the target of an operating margin of around 7-8 per cent, set by the parent for all its subsidiaries. It is interesting to note that apart from the parent company, which is listed in Finland, no other subsidiaries or affiliates of the company are listed.

Clearly, Wartsila India's record low share price would have offered an excellent opportunity to the parent for delisting the Indian arm as well.