Shares of Allcargo Logistics dropped nearly 4 per cent on Monday after the floor price set for delisting disappointed investors. The company had, on Saturday, announced that its promoters had set the floor price for delisting at Rs 92.58 — 19 per cent lower than Allcargo’s last closing of Rs 114.5 on Monday.
The floor price is the base price at which promoters intend to purchase shares from the public to take the company private. The final delisting price is always at a steep premium to the floor price.
Experts said investors expressed disappointment over the low floor price as it signals that the promoters may not be very serious about delisting.
“Delisting will be a positive development, but the proposed delisting price is not up to expectations of public shareholders,” said Yash Gupta, equity research associate, Angel Broking.
Over the past three weeks, shares had rallied close to 30 per cent on the back of the delisting announcement. Public shareholding in Allcargo is at 30 per cent. Vedanta, Hexaware, and Adani Power are few other firms in which promoters have announced delisting bids.
Investors usually lap up shares of companies when they intend to delist, as these trades tend to be very rewarding. However, an unsuccessful attempt makes such bets go awry.
“Investors should not lose sight of the historical valuation. You may get a small premium to the historic price-to-earnings valuation, but not more,” said A K Prabhakar, head (research), IDBI Capital Markets.
“Delisting is not something that will create wealth for investors. The promoters’ intention is very clear — to run the business privately. They also have constraints of capital and cannot pay you unlimited money. It’s better for investors to stay away from the delisting if they do not understand the nitty-gritty,” Prabhakar added. Allcargo provides services like global multimodal transport operations, container freight stations, inland container depots, third-party logistics, and warehousing.
Experts said investors should buy shares of firms that have announced delisting if they are bullish on prospects of the company and not just with an eye on profits from the delisting trade.
Sebi eased the delisting framework last year, levelling the field between shareholders and promoters. Over the last few years, more than half a dozen listed firms have seen their share prices tank after unsuccessful delisting attempts.