Cox & Kings (CK) has been hitting new lows everyday without any
particular reason, which therefore can be attributed to the general pessimism in
the market given the adverse news flows and policy decisions of the government.
Sir John Templeton’s, the founder
of the Templeton Group (which was later acquired by Franklin Templeton
Investments), was a great investor of the 20th century, and believed in
investing with a bargain hunter's discipline. He would say that the time of
maximum pessimism is the best time to buy, and the time of maximum optimism is
the best time to sell. I, for one, am a firm believer in Sir John Templeton’s
philosophy. If someone had bought Wockhardt in early ’09 when it was close to
Rs 100, you can imagine where the person would be today when it is quoting
around 700. And that was the time when the market didn’t want to touch
Wockhardt with a bargepole.
The same theory can be applied to
Cox & Kings. One swallow doesn’t make a summer and one or two bad results
should not be the basis for shunning a stock which used to command investor
fancy not too far back. There can’t be a unidirectional movement in any stock,
however good it may be and there will be occasional blips which would provide
the opportunity to get in. CK is probably going thru a similar phase. While I
can’t say for certain whether it will fall further or not, I do believe that
now is as good a time as ay to buy it. If it dips further, buy more and wait
for the rollercoaster to change trajectory and start the ride up!
Areva T&D's global business was acquired by a consortium of
Alstom and Schneider Electric in June 2010. Following the buyout, Alstom & Schneider
Electric in December last year said they had assumed operational control of
Areva T&D India. Alstom in India is mainly into power generation equipment
while Areva T&D India is a leading transmission & distribution player.
To reflect this parentage, Areva T&D renamed itself as Alstom T&D.
Further, under a scheme of demerger, it demerged its distribution business to
Schneider Electric Infrastructure leaving the high-voltage transmission, power
electronics and automation business operations under the control of Alstom. The
name of the remaining company may yet change to reflect the changed business
profile. I had commented on this development last April and the script is still
shaping up.
Following the above corporate
development, Scheider Electric finally listed around 65 on the exchanges in
March ’12 and currently quotes around 90. Now that this has finally happened, there
are 2 separately listed companies each having a different owner and my thinking
is that this could play out in 3 ways:
1. Alstom may not want 2 separately listed companies
in India, merges the transmission business company (Alstom T&D India) with
itself and either buys out the minority shareholders in it or allots its own
shares after a valuation process. In this case, the shareholders of the company
will get either money (and I guess quite a bit as Indian shareholders are not
know to let go easily) or shares in Alstom Projects India (which itself may not
be a bad thing considering its standing).
2. Schneider may choose to delist its listed Indian
arm, since it has no listed presence in India of its own and may not want it
now. Again there would be a buy-out of the minority shareholders.
3. Both companies remain listed, majority owned by
their global MNC parents. In this case, each company would be valued separately
and find its own level which may be significantly higher considering the niche
positions each parent enjoys in the power space globally.
Chances of options 1 and 2
happening appear brighter considering that it has been a forced listing for
Schneider and while it is present in India and growing, it is not listed.
Alstom on the other hand has been present in India in a listed form for quite
some time now, and may also consider consolidating its operations into a single
entity.
There was a recent announcement of an open offer for both Alstom T&D as well as Schneider Electric, the first one at 187.64/share and the second at 83/share. These are merely for statutory purposes and should not be mistaken for an open offer for delisting. In the case of Schneider Electric Infra (the listed company in India), Schneider Electric S’pore acquired its parent Energy Grid Automation, an Indian company. A similar is the case with the former, though the entities may be different. Both these companies together made up the erstwhile Areva T&D India.
ReplyDeleteThe point is that whoever had bought Areva shares a couple of years ago would have got these Schneider shares @about 60 thus giving a 50% return in about 2 years. However, all may not be lost yet with the possibility of Alstom consolidating its businesses as mentioned earlier still holding good. This is the same Schneider which bought Zicom’s the institutional and Goverment business segments which were run under the brands Building Solutions Group and Special Project Group.