Siemens: Exit route

Most analysts advise an exit in the open offer despite a good December quarter performance.

After a sharp rally, Siemens’ shares settled with a gain of 17.32 per cent at Rs 853.5 on Monday in a weak market after its parent company, Siemens AG, announced an open offer to buy up to 19.8 per cent equity at Rs 930 per share. The December quarter results, announced on January 28, also exceeded expectations.

Revenue grew 36 per cent to Rs 2,538 crore, led by a 59 per cent jump in sales in the energy segment (Rs 1,350 crore). The industry segment continued to witness subdued growth of six per cent at Rs 1,217 crore.

Operating profit margin fell over 500 basis points to 14.3 per cent, mainly led by a 730-basis-point drop in the profit before interest and tax margin in the energy segment and a one-time income of Rs 76 crore in the December 2009 quarter due to early completion of projects. Net profit margin declined to a lesser extent (by 300 basis points) to around 10 per cent, aided by an 85 per cent jump in interest income (Rs 29 crore) and stable tax outgo (Rs 121 crore).

The company’s order book expanded just 11 per cent to Rs 15,132 crore, courtesy a high base. Though order inflows fell 23 per cent to about Rs 4,000 crore due to huge orders from Qatar a year ago, the sequential rise was 30 per cent.

The healthy momentum in order inflows is likely to continue, helped by Power Grid Corporation’s 2011-12 estimated expenditure of Rs 12,000 crore, initiatives in sectors like renewable energy, healthcare and wind turbines, and business from markets like West Asia and North Africa, amid the parent company’s strategy to make the Indian subsidiary a hub to cater to these regions.

However, the financial performance is expected to be affected by moderate growth in the industry segment’s revenues and margins, emanating from the competitive energy business (about 70 per cent of the total order book). Most analysts advise an exit in the open offer due to intense competition.