The Hindu Business Line : Abbott India stock stays flat despite buyback offer

Kolkata, March 7 A substantial gap continues to remain between the buy-back offer price and the market price in Abbott India. The buy-back offer, which after revision in timeline opened today and which closes on March 22, has a price tag of Rs 650 for a share of Rs 10 each. On the bourse, the stock today closed at Rs 550.50, the level more or less unchanged for last one month.

A month ago and a week ago, the stock ruled at Rs 551. According to market players, since the offer is for 8.07 lakh shares representing 5.28 per cent of the current paid-up equity of the company and the specified date for the offer October 20, 2006, the current market price is only attempting to discover price after March 22.

Though the offer time was revised after permission from SEBI was obtained for exemption from regulations regarding open offer (to the minority shareholders in view of indirect shareholding increase as a result of the buyback), the specified date has remained unchanged.

The buy-back offer, if responded to fully, will reduce outstanding shares and inflate promoter holding to 65.14 per cent from 61.70 per cent. NYSE-listed Abbott Laboratories holds the principal holding in Abbott India through a subsidiary registered in India.

Based on last audited results, the average return on company's net worth post buy-back is estimated to go up to 27.94 per cent from 25. 90 per cent (computed after adjusting PAT for loss of income at 5 per cent per annum post-tax on the buyback money) and the EPS would change to Rs 39.55 from the pre-buyback level of Rs 39.18, according to the offer letter.

The reserves as on November 30, 2006 stood at Rs 230.53 crore, while the paid-up capital was at Rs 15.28 crore. The buy-back price fetches a 29 per cent premium on market closing price on August 17, 2006, the day before the notice convening the board meeting to consider the buyback proposal was placed before the BSE.

Incidentally, the 52-week high of the stock on the BSE was Rs 717, recorded a year ago on March 7, 2006.

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