Indian Indices Extend Gains; L&T and ICICI Bank at Record Highs

Mon, 27 May 12:30 pm

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Share markets in India are presently trading on a positive note. Barring telecom sector and energy sector, all sectoral indices are trading in green with stocks in the capital goods sector, metal sector and realty sector witnessing maximum buying interest.

The BSE Sensex is trading up by 276 points (up 0.7%), while the NSE Nifty is trading up by 85 points (up 0.7%). The BSE Mid Cap index is trading up by 0.9% and the BSE Small Cap index is trading up by 1.6%.

The rupee is trading at Rs 69.44 against the US$.

Market participants are tracking Abbott India share price, BHEL share price, and Natco Pharma share price as these companies are set to announce their March quarter (Q4FY19) results today.

You can also read our recently released Q4FY19 Results: Bajaj Auto, IndusInd Bank, JSW Steel, Bata India, Karur Vyasa Bank.

In the news from the textiles sector, Page Industries share price is witnessing selling pressure today after the company reported weak Q4 results.

Shares of the company plunged around 10%, hitting a 52-week low of Rs 19,730, after the company delivered its worst-ever quarterly performance.

The company's net profit declined 20% YoY at Rs 3.9 billion. Earnings before interest, tax, depreciation and amortization (EBITDA) margin declined by 440 basis points (bps) YoY to 19.7%.

Reportedly, earnings declined mainly due to weak demand, high base and intensifying competition in the March quarter earnings.

The company in a BSE filing said, 'the reported negative growth in profit after tax (PAT) of Q4FY19 is a result of a one-time gain from sales schemes reversals and Goods and Services Tax (GST) transaction credits in Q4FY18, and higher sales schemes incurred in Q4FY19'.

Page Industries is the exclusive licensee of Jockey International Inc. and Speedo International limited.

To know more about the company, you can read Page Industries' Latest Result Analysis on our website.

Moving on to the news from the engineering sector, Larsen & Toubro (L&T) has raised its stake in IT firm Mindtree by about 2% throughout last week by picking up shares worth over Rs 3.2 billion.

According to BSE data, L&T acquired shares from the open market with the highest quantity of shares being purchased on May 24 when it picked up nearly 2.5 million shares of Mindtree at Rs 980 apiece.

In March, L&T had initiated a hostile takeover bid on Mindtree when it entered into a deal to buy Cafe Coffee Day owner V G Siddhartha's 20.3% stake.

After these deals, L&T was to also make an open offer to buy additional stake. The open offer has been postponed as the company is awaiting market regulator's approval.

Irrespective of the open offer, L&T will continue to purchase Mindtree shares from the public during trading hours until it finishes buying the planned 15% from the open market.

As per the reports, the combination of the two companies will help create an entity with a higher turnover of close to Rs 120 billion, closer to larger rivals such as Wipro and TCS.

The Mindtree management, however, thinks differently.

Creating Synergies?

Given that the takeover has just been launched, it would be too early to make any predictions regarding the outcome.

While the L&T-Mindtree saga will one day disappear into the history books, the lessons will not.

One thing that we must bear in mind is that most companies in India are managed by promoters.

Hence, they are bound to protect their interest and will not relinquish control without a fight.

This means that the company launching such an attack needs to be very clear as to why it wants to go down this route.

Here's snippet from the article on hostile takeovers that Tanushree Banerjee, co-head of research wrote:

• "In mergers and acquisitions, in general, the acquiring company has to make sure that it pays a reasonable price for the target company. It needs to gauge the synergies that are likely to flow in on making the acquisition such that the payback period is not too long. Many a time, when competition for a particular target heats up, valuations soar. As a result, the company which has finally made the acquisition ends up paying a very high price."

This applies to hostile takeovers as well.

L&T share price and Mindtree share price are presently trading up by 2.7% and 0.1%, respectively.

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