Reverse Merger Synergy

The merger will give better operational efficiency; already both companies operate from the same office in Chennai.

Earlier predictions were that Essar Shipping would be merged with Sisco because of better fundamentals of the latter company in terms of fleet and past financials. Surprising, Sisco is being merged with Essar. This would lead to a huge equity base of the merged entity, which investors may not like.

Going by the market price of both the scrips, most analysts predict the ratio to be 1:2 in favour of Sisco. However, taking fundamentals such as the reserve position and past earnings, the shareholders of Sisco should get a better valuation, which the promoters also would like. Analysts say the promoters have been trying to prop the intrinsic worth of Sisco, because two tankers were transferred by Essar to Sisco end 1995-96.

 

One factor which can possibly go against Sisco has been the first half performance in 1996-97, which showed a dip in its bottomline by 14.72 per cent to Rs 17.55 crore while that of Essar Shipping increased by 14.51 per cent to Rs 27.06 crore.

Actually the performance of Sisco should have been far better because of the transfer of two tankers. The Sisco scrip at Rs 32 discounts the current EPS by 2.1 times, while that of Essar at Rs 13.25, surprisingly gets a better discounting of 3.69.