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Shanthi Venkataraman

SHAREHOLDERS of Jaipur Polyspin can tender their shares to the offer made by its acquirer, Rajasthan Spinning.

The recent run up in the stock price was mainly due to the open offer rather than any change in fundamentals.

The price still remains attractive, considering the company's FY-04 earnings per share of Rs 0.33.

Rajasthan Spinning has acquired a 59.6 per cent in Jaipur Polyspin and is making an offer to mop up an additional 20 per cent in the company.

Both companies make and sell synthetic blended yarn. The acquisition would add further to Rajasthan Spinning's capacity.

The latter plans to invest Rs 13 crore in modernising of Jaipur Polyspin's operations. This would provide scope for revenue and earnings growth.

The removal of quotas and the recent hike in DEPB rates for the synthetic and man-made segment should help it record better profits.

Even on a forward earnings basis, however, a price of Rs 29 would still make it an expensively valued stock.

The acquirer also plans to consider merging Jaipur Polyspin with itself at a later date. The swap ratio may, however, be tilted in favour of the shareholders of the latter.

To avoid this risk, it may be a better option to tender shares in the open offer and/or sell at the prevailing market price.

In this backdrop, shareholders may be better off exiting the stock at the offer price.

Offer details: The offer opened on December 30, 2004 and closes on January 18. The manager to the offer is Chartered Capital and Investment and the registrar is MCS.

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