The Hindu Business Line : Volatile trading in demerged L&T

THE counter of the restructured L&T debut was marked by volatility in an uncertain market. The stock, which went on a roller-coaster ride on the bourses on the first day of its listing, post-demerger, did however live up to market expectations.

"Net on net the price movement was flattish. That is if you take into account the reduced equity of L&T and exclude the value of its cement business," said a dealer. The face value of the new L&T stands at Rs 2 per share.

Trading in L&T was suspended as on May 19 (BSE) and May 21 (NSE), on the bourses in order to give effect to the company's restructuring operations. Following the demerger of its cement business, now Ultra Tech Cemco, the new-non-cement L&T is attractively valued, say analysts.

"Today in its new avatar it's a more focussed company, in an arena where traditionally it has been a strong player. Going forward, one could see a Rs 750 - Rs 800 price level, in a good market," speculated an analyst. The stock opened today at Rs 444.55, hit a high of Rs 690 and a low of Rs 511 before ending the day at Rs 635 on the BSE with around 27.63 lakh shares traded.

On the NSE, the stock opened at Rs 500, hit a high of Rs 745 and a low of Rs 150 before closing at Rs 635.95. with around 26.99 lakh shares traded.

While dealers said that several funds had turned seller at the counter, it was attributed to redemption pressure or a reshuffle in portfolio and not a reflection on the stock's valuations. In fact, a section of the market was of the view that given that the counter held its own in an otherwise bearish investment climate, is an achievement in itself.

A Merrill Lynch report on the company's demerged financials early this month had assumed a 20 per cent topline growth supported by the company's current order backlog. The report has also taken a conservative stand on the company's EBITDA margin and forecast a 31 per cent earnings CAGR for the non-cement L&T over FY04A and FY06E. "We assess the fair value of L&T (non-cement) at Rs 600 per share, placing it at a PE of 13x of FY06E, in line with our target valuation for the local market," said the report.

The market is, however, not so positive on the trading value of Cemco's share - when it lists— with many of the view that the cement stock in all likelihood will debut at around Rs 150. According to market rumours, Ultra Tech Cemco is likely to list on the bourses by the second week of July. June 21 was the closing date on the Grasim open offer for 30 per cent stake in the company.