The Hindu Business Line : Elpro to pay back shareholders with a premium

Kolkata, Sept.12 Dabriwala family-controlled Elpro International has reduced its paid up capital in the company by 25 per cent —from around Rs 3.56 crore to about Rs 2.67 crore —and for the first time in the history of Indian capital market, it is paying back shareholders a huge premium of Rs 173 per share for Rs 10 each stock. Earlier, some companies paid back the shareholders after a capital reduction, but in all such cases no premium was paid.

The stock shot up by 10 per cent on Wednesday. In the past one week, the stock has improved by 41 per cent.

According to market analysts, several fundamentally positive developments have made the stock attractive. Apart from the company’s plan to pay back Rs 183 per share reduction, development of its land assets, a total of 10 lakh square feet in Pune has also been behind stock’s recent revaluation.

Analysts said the company has been conserving capital for stepped up investments in insurance business in India, which according McKinsey is poised to grow from $43 to $100 billion on the back of private investments.

According to industry sources, Elpro’s original 25 per cent stake in MetLife India Life Insurance Company Private Limited, which has now come down slightly following the insurance company’s recent capital expansion (from Rs 530 crore to Rs 761 crore). Though, Elopro management was not available for comment on its investments in MetLife India, industry sources told Business Line, assuming that Elpro did not subscribe to in the capital expansion, its stake would be around 16 per cent in MetLife, value of which is around Rs 1,200 crore.

Earlier, the market had priced in its sale of businesses. On May 3, 2006, the Isolator Division at Hyderabad was sold to Siemens Ltd, subject to the determination of final amount of sale consideration the company received Rs 25 crore. The promoters as of June 30, 2007, held 60.13 per cent in Elpro, which would go up after the capital reduction. Interestingly, one of the PACs, Goel Fintrade has increased its stake to by 0.5 per cent through market purchase on August 20. An analyst with an institutional brokerage said the now the company is now more into insurance and real estate than manufacturing . “Hence, it is being aggressively valued in line with the change in business dynamics.”

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