Fulford plunges on lower delisting price

With the parent company of Fulford (India) Ltd fixing a buyback price that is nearly a third lower than the current market price of the stock, investors appeared to be looking to exit the counter after the stock had hit a 52-week high on Tuesday morning. The stock plunged 5 per cent to close at ₹1,584.30.

Many riders What may have unnerved the investors was not only the fact that the proposed delisting offer came with many riders but also the statement by the acquiring company — Dashtag, the promoter of Fulford (India) Ltd (a subsidiary of US-based Merck & Co) — that the recent run-up in the share price was not ‘reflective of the business fundamentals of the company’.

Reaffirming the indicative price that was approved by its board at ₹1,150 a share, it said it followed ‘stringent financial discipline’ while making acquisitions and ‘does not intend to make acquisitions that do not satisfy its financial expectations’.

Dashtag at present has 74.95 per cent equity stake in the pharma company. Explaining the reasons for the delisting move, the acquirer said it wanted full ownership of the company for higher operational flexibility for its business in India and the offer provided the Indian shareholders with an exit route at an ‘attractive price’.

Selling pressure The stock soared to a high of ₹1,690 on Tuesday that was also its 52-week high but the steep discount at which the buyback price was fixed compared with the market price sent the stock down. For most part of the day there were only sellers in the counter, which witnessed a trading volume of 26,000 shares.

During the 15-month period ending March 31, Fulford reported net income of ₹269.64 crore and net profit of ₹4.47 crore. The EPS was ₹11.45. The very low equity base of ₹3.90 crore may have lent some strength to its EPS, though in the previous year-ended December 31, 2012, the company was in the red. Since hitting a 52-week low of ₹450 on August 1, 2013, the stock price had zoomed by nearly 400 per cent, driven largely by the delisting hopes.

It further stated that the delisting offer would be successful only if the acquirer’s shareholding crossed 90 per cent of equity and ‘the discovered price/exit price for doing so is acceptable to the acquirer’.

‘Use discretion, caution’ But what was important was that if the delisting efforts were not successful, Dashtag said it might ‘consider other strategic alternatives in relation to its ownership of shares in the company’ without elaborating and asked the public shareholders ‘to use discretion and caution’ while trading in Fulford shares.

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