Valuation-wise, paint companies have always traded expensive, given their high earnings growth visibility and dividend-paying policies.
MIP is seen as one of the toughest protective trade measures that a country can impose. It sets a price below which imports are not allowed into the country.
The IPO appears to be fairly priced. The only risk is that a significant part of the company’s revenues come from UK and pound has fallen after Brexit.
The company exhibits financial discipline, cost and risk controls, constantly improving product mix and focus on operating margin.
The zinc business of the company is the highest earnings contributor, making up around 75 per cent of earnings. The prices of zinc have gone up by 18 per cent since April.
They had bought the company’s share in May 2014 at an average price of Rs 97 per share, making over 80 per cent returns on their investments in two years.
The recent surge in caustic soda prices did enable PACL narrow its net loss substantially to Rs 18 lakh during the March quarter.
Kerosene and LPG are sold well below their cost of production. Currently, under-recoveries on kerosene and LPG are Rs 13.1 a litre and Rs 116 per cylinder, respectively.
The transaction is valued at an enterprise value (EV) of around $430 million (about Rs 2,900 crore). Earlier in the fiscal, the company also monetised its two data centres for Rs 3,800 crore.
A response from Mandhana to ET’s email query said there were no new developments apart from the disclosure made to exchanges on Tuesday. Khan’s foundation did not respond to an email questionnaire.
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