Pre-Merger Spike In Ponds Volumes
There was a sudden spurt in trading in Ponds India, prior to the announcement of its merger into Hindustan Lever Ltd on February 12.
On February 6, 23,450 Ponds shares were traded on the Bombay Stock Exchange, compared with just 3,600 shares on February 5. Traded volume surged to 31,100 on February 9 and 42,000 on February 10.
On the National Stock Exchange, volumes flared up to 68,300 shares from 10,700 shares on February 5. Nearly 112,700 shares changed hands on February 9 and about 87,100 shares on February 10.
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Trading in the Ponds scrip initially took off last September, after a bonus issue meeting on September 11. On the BSE, the daily average volume in September 1997 shot up to 14,500 shares from an average of 7,000 shares in August 1997. On the NSE too, an average of 53,500 shares were traded per day compared with just 8,500 shares per day in the previous month.
Trading in the scrip remained sedate in October. However, it subsequently picked up, with an average daily volume of between 11,000 and 13,000 shares on the BSE in November-December.. The BSE witnessed an average daily volume of 11,000 Ponds shares in January. On the NSE, the average daily volume zoomed to 61,000 shares in November, but dropped to 30,000 in December. This fell further to around 15,500 in January. The rise in trading volume is attributed largely to the fact that November was a no-delivery period for bonus issues.
Analysts now talk of a merger ratio of 0.8:1 (eight shares of HLL for 10 of Ponds) and market circles seem to be accumulating Ponds shares at Rs 920-950 keeping in mind the expected merger ratio. The trading interest at this counter has been seen for some time, with the market of the view that any merger would be in favour of Ponds, a corporate broker at the BSE said.
A NSE source argued that speculative elements were at play rather than any party standing to gain unfairly through information which was not public. The role of local operators here is stronger than any institution/foreign fund.
The market started taking a view on the stock keeping in mind the results, suggesting that the worst times were over, he said.