Minority shareholders have given a thumbs-up to British company GSK Pharma’s decision to increase its stake in its Indian arm.
Besides cashing in on a market premium for an attractive exit in the short-term, market experts believe the GSK deal offers advantages of a good long-term hold call for investors.
The open offer at Rs 3,100 a share comes at around 6 per cent premium to the last closing price of Rs 2,927.40 on Monday.
Jagannathan Thunuguntla, Strategist and Head of research, SMC Global Securities, said: “This tells you that GSK is in India for the long haul. The parent company would be looking at the next 50-100 years. If some company is putting in a billion dollars, it tells you that they have a lot of strategic interest in the Indian market.”
Shriram Subramaniam, MD, proxy advisory firm Ingovern Research Services, said: “There is nothing, in particular, to worry minority shareholders, given that the valuation is at a premium to the stock price for a long time. Moreover, promoters are holding short of the 75 per cent mark. I think everything looks smooth at this point in time.”
According to Kishore Oswal, CMD, CNI Research, if the company is giving a premium to the current market price, it offers a good exit to existing investors.
“The possibility of a fall in stock price is limited, as multinational corporation stocks mostly have poor liquidity as they are largely held by institutional and high net worth investors. However, now that the stock has already rallied close to the offer price, it may not be of much use to enter the stock and pay capital gains tax. Those previously holding the stock have already sold on profit-booking.” Rajat Rajgarhia, Director, Research, Motilal Oswal Financial Services added: “From a long term point of view, a multinational increasing its stake in the Indian arm is a positive signal since it adds a lot of value and reduces floating stock, rendering a rich stock.”
Given that the MNC stocks are expensive and trading at attractive valuations and offering a good premium, they offer a lucrative option for those willing to cash out. “These investors can then enter another undervalued stock,” he added.