Financial Daily from THE HINDU group of publications
Sunday, Mar 12, 2006
Financial Daily from THE HINDU group of publications Sunday, Mar 12, 2006 |
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Investment World
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Stocks Markets - Recommendation Corporate - Restructuring KEC International: Hold Vidya Bala
Investors of the erstwhile KEC International will now have a share each in two newly-listed companies — KEC International and KEC Infrastructure — for every share they had held earlier. The newly-listed KEC International (Rs 422) will carry on the core business of power transmission and distribution; KEC Infrastructure (Rs 51) would hold investments in group companies and non-core advances divested from the parent company. From the investor's perspective, this move has unlocked value. The restructuring would bring about a pure player in the turnkey power solutions business under KEC International. The technical qualification and experience of the parent company in the power business will remain intact.
Prospects
We remain positive on the power transmission and distribution business of KEC International. An order-book of Rs 3,000 crore adds high visibility to the earnings for the next two years. The transfer of a part of liabilities to KEC Infrastructure is likely to lead to a cleaner balance-sheet in FY-06 with a higher return on shareholder funds. Business prospects also continue to remain bright on the back of high power transmission and distribution spending envisaged in the Budget. Investors with a two-year perspective can retain holdings. KEC Infrastructure holds equity in Ceat, CESC and RPG Life Science. The per share value may range between Rs 35 and Rs 40 excluding the value of the real estate held by the company. A better picture of the company may emerge only after FY-06 earnings.
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