The Hindu Business Line : JBF Industries: Reject

The offer price of Rs 46.50 is well below the current market price of about Rs 75. JBF Industries recently made a preferential allotment to private equity funds managed by Citigroup. Post-allotment, the acquirer's stake in the company is 25 per cent.

The offer is being made in accordance with SEBI's takeover regulations. The acquisition is made purely from an investment perspective and there would be no change in management.

JBF Industries makes polyester chips and partially-oriented yarn. The company would use the funds raised from the preferential issue to expand the polyester chips capacity.

The company's performance has, so far, been constrained by higher raw material prices. Low prices have also made cotton the preferred fibre over synthetics.

While crude prices continue to rise, those of PTA (purified terephthalic acid) and MEG (mono-ethylene glycol) are likely to ease due to improvement in the supply situation.

Fresh capacities of PTA and MEG have come up in China, which has been the major driver of demand.

There is scope for growth on the revenue front as well, on the back of strong demand from outfits operating in home textiles and industrial textiles segments, where polyester finds application.

In this backdrop, investors can consider holding the stock.

The offer closes on August 24 and Brescon Corporate Advisors is the manager.

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