‘GSK Consumer open offer attractively priced, but acceptance ratio is key’

Our Bureau Chennai | Updated on January 16, 2013 Published on January 16, 2013


Issue opens today at Rs 3,900 a share

Should retail investors of GlaxoSmithKline Consumer (GSK Consumer) participate in the open offer? Though most analysts said the offer is attractively priced, some are advising investors to sell the shares in the open market, as the price difference is very narrow.

The open offer, which opens on Thursday (January 17), will close on January 30.

The UK parent GlaxoSmithKline Plc had made an offer to acquire up to 1.34 crore shares (or 31.8 per cent of the total outstanding shares) of the GlaxoSmithKline Consumer Healthcare at a price of Rs 3,900 a share.

On Wednesday, the stock of GSK Consumer closed at Rs 3,822.40. The 52-week range for the stock is Rs 3,894-Rs 2,179.

At Rs 3,900 a share, the total outgo for the company would be around Rs 5,220 crore.

‘FIIs exit slim’

According to an analyst with institutional brokerage, the acceptance ratio depends upon how the institutional investors, such as Arisaig Partners (currently holds 5 per cent), respond.

“Foreign-based funds are keen on consumption-based themes in India. With only limited listed stocks available for them at an attractive valuation, the chance of FIIs exiting through the open offer is slim,” he said.

Currently about 25,000 retail shareholders hold around 15 per cent stake in the company.

“Given that the chance of the stock appreciating from current level is limited due to its stiff valuation, retail investors should consider the offer,” he added.

The stock is currently quoting at price-to-earning multiple ratio of 38.

‘No great advantage’

Ekansh Mittal, Founder — Katalyst Wealth, said: “In our view, there is no great advantage in tendering one's shares as one can easily sell-off in the market at around current rates and thus avoid the hassles and the risk of low acceptance in case institutions tender their shares.”

Analysts also said that another advantage in selling shares through open market is tax benefits, as offer route will attract long-term capital gains tax.

Girish Jain, Executive Director, KJMC Capital, said, retail investors should tender their shares as the price is very attractively priced based on FY13 valuation.

“As the management is very clear not to delist the company's shares from Indian bourses, we expect the price to move downwards post open offer,” he added.


Published on January 16, 2013
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