VN Corporate VN Research & Consulting VN Sourcing Practice IndiaNotes
 Like us on facebook  Follow us on twitter  Follow us on LinkedIn  IndiaNotes on Google Plus  IndiaNotes on Pinterest  IndiaNotes on Stumbleupon  Subscribe to our feeds


Stocks  A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z
Search
Feedback
You are here : IndiaNotes >> Research & Analysis >> Companies >> Zuari Global Ltd. >> Research

Zuari Global: Deep value - rerating could begin soon

HDFC Sec | Published: 26 Nov, 2012  | Source : ValueNotes.com | Follow Author | Add to my Favourites


Event

Zuari Industries Ltd’s (now Zuari Global Ltd) Board of Directors at a meeting held on 24th May 2011, considered and approved, a Scheme of Arrangement / Demerger with Zuari Holdings Ltd. (ZHL) (now Zuari Agro Chemical Ltd (ZACL)), under the provisions of Section 391 to 394 of the Companies Act, 1956. The appointed date of the arrangement / demerger was 1st July 2011. Upon completion of the arrangement / demerger, shareholders of Zuari Industries Ltd. would receive 1 fully paid equity share of Rs10 each of Zuari Holdings Ltd for every share held by them in Zuari Industries Ltd, on record date to be fixed by Zuari Industries Ltd. The record date for said demerger was fixed at 10th April 2012.


ZACL is in the process of getting listed. ZGL has received approval from the SEBI and has released an information memorandum in the newspaper on 10th November 2012. The stock is expected to start trading from 27th November 2012. The purpose of our note is to take advantage of the discount in valuation of ZGL.


ZGL remains listed in the meanwhile and the share price of ZGL has fallen from Rs183 in April 2012 to the current price (in the interim making a low of Rs112.) One reason for the stock price continuously falling was that its 30% holding in Zuari Agrochem was not getting reflected adequately in the absence of its shares being listed. This could now get rectified once ZACL shares get listed on November 27.


Rationale for Demerger

Zuari Industries Ltd (now ZGL) had grown into a very sizeable organization and had evolved into a well diversified and progressive industrial group. Each business of ZGL was distinct and diverse in characteristics. The rationale for the Scheme of Arrangement and Demerger was to consolidate the fertilizer businesses of the Zuari group under one company. Zuari Global Ltd (ZGL) (previously Zuari Industries Ltd) is now a holding company for the groups various businesses. All fertilizer operations of ZGL have been demerged into Zuari Holdings Ltd (ZHL) (now renamed to Zuari Agro Chemicals Ltd (ZACL)). ZACL’s subsidiaries (Zuari Seeds Ltd and Zuari Fertilizers and Chemicals Ltd) have also been demerged from ZGL. Additionally, Zuari Rotem Specialty Fertilizers (50:50 JV with Rotem Amfert Negev Limited, Israel) and Zuari Maroc Phosphates (50:50 JV with Maroc Phosphore S.A., Morocco) have also been demerged into ZACL. However, ZGL will hold 30% in ZACL, while the remaining 70% will be distributed to shareholders of ZGL in the 1:1 ratio determined previously.


Valuation & Recommendation

HDFC Sec has valued ZGL on a SOTP basis, taking into account the consolidated financials (excluding income from investments) of ZGL, consolidated book value of ZACL and book value of investments and cash. Based on this valuation methodology, HDFC Sec feels ZGL shares could be bought at the CMP for a target of Rs188 in 1-2 quarters.



  Read full report Click here to read the full report

About HDFC Sec

HDFC Securities a trusted financial service provider promoted by HDFC Bank and JP Morgan Partners and their associates, is a leading stock broking company in the country, serving a diverse customer base of institutional and retail investors. HDFCsec.com provides investors a robust platform to trade in Equities in NSE and BSE , and derivatives in NSE. Our website will support you with the highest standards of service, convenience and hassle-free trading tools.

For more information please write in to editor@indianotes.com


Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.

 
BSE
89.00 +0.25
(0.28%)
NSE
88.65 -0.55
(-0.62%)
Read More


Have a question?

Vivek Shah
Technical Analyst - Shah Advisory

Other Articles


Technical Calls

What are technical calls?




Close ad
Avail instant loan on shares at 13% rate of interest!