Open offer unlikely to lift Castrol India stock as premium remains modest

Stonepeak's open offer for Castrol India at ₹194.04 a share is only slightly above the market price, prompting analysts to expect limited movement in the stock despite the ownership change

US private equity firm Stonepeak’s open offer is unlikely to trigger a rally in Castrol India’s stock on Friday, as the offer price is only marginally above the current market price.

 

What is the offer price and how does it compare with the market?

 

In an exchange filing after market hours, Castrol India said Canada Pension Plan Investment Board and Stonepeak will launch an offer to purchase 26 per cent of its shares at ₹194.04 per share. The open offer price is 2.3 per cent above Wednesday’s closing price of ₹189.6. The open offer is part of Stonepeak’s deal to acquire Castrol India from its parent BP.

 

 

Why do analysts expect limited stock movement?

 

" The stock is unlikely to move much as the offer price is not at a significant premium to the last closing price. But there have been instances when stocks have traded above the offer price, so one cannot rule that out either," said G. Chokkalingam, founder of Equinomics.

 

What is the outlook for Castrol India’s business?

 

On the outlook for the stock, Chokkalingam said Castrol India has been struggling to expand its market share.

 

" There has been a lot of competition in the last 10 years. So many companies have entered the lubricants business. Moreover, demand for lubricants will decline as electric vehicles become more popular. In the long term, it’s a smart move to sell it off," said Chokkalingam.

 

How has the stock performed so far this year?

 

On a year-to-date basis, Castrol India’s stock has declined by 2 per cent.