The Hindu Business Line : Yashraj Securities: Accept

Shareholders can consider accepting the open offer made at Rs 94.5 per share by the acquirers, as the business prospects for Yashraj Securities, the target company, appear bleak. Although the offer price is at a five per cent discount to the current market price, it offers a reasonable exit point for the shareholders. With a low market capitalisation (about Rs 10 crore), the stock is highly susceptible to market swings, which increases the associated downside risks.

Yashraj Securities is engaged in investment activities. The company's performance over the last few years has been marked by sharp variations. In FY-06, it reported revenues of Rs 1.6 crore and post-tax earnings of Rs 1.6 crore. For FY-05, the numbers stood at Rs 4 lakh and Rs 2 lakh respectively. On a smaller base in FY-05, this growth appears normal. But the company's ability to sustain the same is open to question. The numbers for the June quarter (September data not available) are not encouraging. While the revenues recorded a sharp slide of over 80 per cent, earnings fell by 84 per cent on a year-on-year basis.

Through the open offer, the acquirers propose to take control of Yashraj Securities with an intention of discontinuing the existing business and venturing into real-estate. Although the acquirers have experience in the construction and real-estate business (currently in the capacity of promoters and directorships in some companies engaged in building and developing property), their ability to execute projects on a full-scale remains to be seen. Further, owing to a low equity base (Rs 1.2 crore), they are likely to face difficulty in scaling up operations. Apart from size being a deterrent to growth, execution and funding problems are likely to pose challenges.

Offer details

The acquirers now hold 13.9 per cent of the paid-up and voting capital and propose to acquire another 20 per cent of the paid-up capital through the open offer. The offer, which opened on November 8, closes on November 27. Fedex Securities is the manager to the offer.

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