The Hindu Business Line : WPIL: Accept

Shareholders of WPIL can exit the company by tendering to the open offer. Since the market price of Rs 35 is higher than the open offer price of Rs 32.45, exiting through the secondary offer route may be considered. The stock has been going up on turnaround hopes, and now offers a good exit opportunity.

Despite being favourably placed to take advantage of the growth prospects in the industry, earnings growth may be weighed down by the high debt burden. At a price to earnings multiple of 50 times its 2005-06 per share earnings, the stock has little scope for appreciation in the near- to medium-term, given the not-so-solid fundamentals. The promoter company, Hindusthan Udyog, too does not rest on a sound financial footing.

Prospects

WPIL is a pump manufacturer with a 30 per cent market share in vertical pumps. It has experience in catering to the power and water management sector and is capable of handling turnkey projects. Despite a reasonable market presence in the product range that it operates in, the company's financial contours are not appealing due to its high debt, poor working capital management and declining operating profit margins. Debt at over two times its shareholder funds is high. The interest component chips away over 60 per cent of the operating profit.

Despite a 44 per cent revenue growth in 2005-06, the company reported a dip in post-tax earnings. The effects of restructuring, if any, will take time to fructify and the near-to-medium-term effects of such restructuring has been factored into the price at current levels.

Offer details: The promoter group has increased its stake in WPIL to 61.39 per cent by acquiring a 17.55 per cent stake at Rs 30.07. The offer is for acquiring a further 20 per cent stake in the company as mandatory requirement. IDBI Capital Market Services is manager to the offer. Offer closes on September 28.

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