- 21 Sep 2022
- ICICIdirect Research
SWARAJ ENGINES PROMOTER HOLDING GETS SIMPLIFIED WITH M&M TAKING SOLE PROMOTER SEAT
SWARAJENG - 3234 Change: 10.70 (0.33 %)News:
In regulatory exchange filing, M&M (co-promoter of the company) informed exchanges about acquisition of 21,14,349 equity shares constituting 17.41% of the paid up equity share capital of Swaraj Engines (SEL) from Kirloskar Industries (KIL) for Rs 296 crore i.e. Rs 1,400 per share (17% discount to yesterday’s closing price).
View:
This would result in a change at the promoter level with M&M being sole promoter for the business. vs. its current classification as co-promoter. In terms of decision making, we do not foresee any change as the top management at SEL were all M&M veterans with automotive division head always on SEL board. We expect the stock to open negative today given that the deal is a decent discount to yesterday’s closing price. However over the long term, we continue to like the company given its superlative financials in terms of cash rich b/s, high return ratios profile (RoCE: 50%, RoIC: 100%), high dividend yield (5%) and easy to understand/track business model of suppling diesel engines (22-65 Hp) to Swaraj brand of tractors at M&M.
Impact:
Negative.