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Stocks of two L N Bangur group companies – Maharaja Shree Umaid Mills (MSUM) and Peria Karamali Tea & Produce Co (PKTPC) – finished at their respective upper circuits on Wednesday in view of windfall profits on their investments in AP Paper Mills.
BSE-listed MSUM closed at Rs 292.70, up 20 per cent. PKTPC, also up 20 per cent, finished at Rs 127.20. MSUM opened at its upper circuit. PKTPC, within minutes of opening, touched its maximum allowable price limit in a session. Orders at higher prices could not be executed in both the counters, dealers said.
Boards of MSUM and PKTPC, group insiders told Business Line , have approved sale of their stakes in AP Paper Mills (APPM) on Tuesday.
MSUM, primarily a profitable cotton and viscose yarn manufacturer and exporter with unit at Pali in Rajasthan, holds over 86.09 lakh shares of APPM, representing 21.65 per cent of the paid-up capital of Rs 39.77 crore. PKTPC, a Coimbatore headquartered tea player having assets across South India, has 12.23 lakh plus of APPM shares or 3.07 per cent stake.
International Paper, which is buying out LN Bangur group's 53.5 per cent holdings in APPM, has valued each promoter-held share at Rs 675.21.
The deal, which was signed on Tuesday in Mumbai, would fetch MSUM Rs 581.30 crore. PKTPC would get Rs 82.58 crore. According to market insiders, the LN Bangur group companies have been investing in the recent past to increase their capacities and sales from their respective accumulated reserves and cash internal cash generation. Group sources said the promoters do not want to skew the debt-equity ratio of the two companies.
“Proceeds of over Rs 200 crore property sale by MSUM earlier this fiscal are funding its on-going capacity expansion,” said a source.
According to Mr C.V. Desai of CD Equisearch, bulk of the APPM stake sale proceeds in the both the companies is expected to be utilised for future earnings growth. However, Dalal Street traders anticipate that MSUM management may reward its shareholders in view of piling up of reserves.
Incidentally, another LN Bangur investment outfit – Digvijay Investments, once listed on the Calcutta Stock Exchange – has 24.7 per cent stake in APPM. According to data disclosed to the exchanges, around 2.5 per cent of Divijay's holdings in APPM, however, are pledged.
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