A minute for your Feedback please

Sunday, September 18, 2011

How ‘Difficult to value’ companies are enhancing their market value

·         List in different market-Makemytrip.com chose to list in USA compared to India, which may not have given it that good a value. Conversely, Biocon chose to list in India despite being ‘new’.
·         Spinoff integrated businesses-Concoco Philips announced the spinoff of E&P and R&M in Jul-11, other smaller players expected to follow suit.
·         Delist holding company and get PE investment/sell off in full-Some Indian companies are following this policy as they are frustrated by the high holding company discounts(upto 70%-80%).  For example, Nirma’s delisting is  presumed to be due to this.
·         Accounting/Reporting:- If the companies make it easy for analysts to value them by clear segment reporting, periodic self SOTP valuations, internal arms length transfer pricing etc, then they may attract a lower conglomerate discount. ITC and Tata Investment corporation have done this to a good extent
·         Transparently communicate strategies:- M&M, Escorts, DCM Shriram and others are adopting this approach to reduce the SOTP discount/even attract a premium.
·         Marketing to correct investor base:- FIIs hold nearly 60% in microirrigation player Jain irrigation. Selling the story to foreign FII investors is easier in the present legal scenario, where FIIs+FDI can go even upto 100%.
·         Asset sale instead of spinoff:- Piramal’s strategically timed asset sale avoided legal hassles.

No comments: