The Hindu Business Line : Avery India: Accept

Shareholders of Avery India can exit the stock either by tendering to the open offer or via the open market, as the company operates in a low growth business and there is no clarity about its prospects under the new management. At the offer price of Rs 55 per share, the stock trades at 17 times its trailing 12-month EPS..

One can tender at current valuations given the uncertainty regarding the business prospects, post-acquisition. Moreover, the stock has been an under- performer in the market over the last two years and the company's financials, too, are not very encouraging.

Niche business

The company operates in a very niche business of making weighing machines and fuel-injection pumps. Avery India operates in the Rs 350-crore Indian market for weighing machines. In the industrial segment, it faces competition from both domestic and multinational players.

The prospects for petrol dispensers, too, do not appear very encouraging, as the four public sector oil companies are its only customers; private players import fuel dispensers. The company is contemplating taking advantage of the retail segment for weighing machines. However, overall growth rates are expected to be in single digit.

If the offer is entirely accepted, the acquirer will have a 75 per cent stake. This could have an impact on the traded volumes that are already thin.

The offer: The open offer is being made by A. V. Acquisitions pursuant to the takeover of Avery Weigh-Tronix Holdings, the parent company of Avery Berkel Holdings, UK, that has a 53.44 per cent stake in Avery India. Enam Financial is lead manager. The offer closes on October 10. The acquirer is making an offer to acquire 21.56 per cent of the equity of Avery India at Rs 55 per share. The offer is made as the global acquisition has led to a change in the management control.

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