Saturday, November 17, 2012

Disa India Ltd - Update

Disa India Ltd has come out with the following announcement yesterday..

DISA Holding A/S (the "Seller") has submitted to BSE a Notice of Offer for Sale an aggregate of upto 173,483 equity shares of face value of Rs. 10/- each of Disa India Ltd. (the "Company and such equity shares referred to as "Sale Shares") aggregating to 11.487% of the total paid up share capital of the Company as on November 15, 2012 by Promoter through a sale on the separate window provided by the BSE Ltd for this purpose.

The Sale shall take place at the separate window of the BSE Ltd and shall commence on November 20, 2012 at 9.15 a.m. and shall close the same day at 3.30 p.m. Indian Standard Time ("Sale Date").

So it seems like delisting is off. Monday should be 'interesting' as far as the stock price is concerned! :-) This is one more nail in the coffin for the 'delisting theme' in the Indian markets.

What is more interesting (and coincidental) is a conversation I had with my good friend Niren over a cup of our daily chai. It was a huge coincidence that we discussed Disa yesterday afternoon and this announcement came in the evening. (All unparliamentary words have been edited from the conversation! :-) )

Niren: So what do you think about the business at present? Clearly there is a slowdown.
Me: O yes, no question about it. Overall, new capex is happening slow or is being differed. The situation is not very great at present as is visible from the last 3 quarters results. So even though the potential is quite huge, conversion of the same in terms of numbers is not happening at present.
Niren: So do you think its cheap at present? Would you buy?
Me: O no not at all. I dont think its cheap at present to buy. But its not expensive enough for me to sell too!
Niren: And what about the delisting angle?
Me: Logically, I think they would delist. They have transferred the disputed shares in quite a hurry, maybe to delist before the deadline. Also, the parent is a private equity group. For them, an unlisted company would be much more easier to sell, whenever they decide to exit.
Niren: But this is not a very big part of the overall group worldwide. Would the parent care enough to delist?
Me: Ya, looking at their actions and thinking from their point of view, I think it makes sense for them to delist.
Niren: Hmmm...

HAHAHAHAHAHAHA!!! I am sure Niren is laughing too. We had this discussion and their announcement came in a couple of hours after that.

On a serious note, lessons learnt:

  • We are not as smart as we think! Logic, mindmaps, 'thinking from their point of view' etc etc. will not always work :-) Market always does stuff to remind us of this fact and keep up humble. 
  • More importantly, this further reinforces my belief to always always always look at the valuations. In Disa, if the business wasnt good and valuations were too irrational, I would have totally panicked after this announcement came. 
  • Special situations players should take this as a big warning regarding so called delisting stories which are quoting at extremely irrational valuations. If valuations do not make much sense, then its not worth the risk hanging on, hoping for delisting.
  • All decisions should be taken on the basis of the underlying business and its valuations alone, without getting distracted by events and news. This helps maintain rationality in decision making.

Cheers and happy investing!!

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Anonymous said...

Neeraj Bhai,

See Below 2000 price :-).

Sameer Gogri said...

Hi Neeraj,

Any particular reason why you dont term this scrip as expensive at P/E of 20.88 & P/B of 9.52 ? In fact, for any sanity to be restored to the trading price, the stock needs to be taken to the cleaners the "Zylog way" for atleast a month !!


Neeraj Marathe said...

Hello Anon,
Why 2000? say 1200! :-D

Hello Sameerji,
Since you have compared Disa to Zylog, I really have nothing to say sir!


Avadhut said...

"In Disa, if the business wasnt good and valuations were too irrational, I would have totally panicked after this announcement came. "

Hi Neeraj,
Can you please elaborate this statement?

I mean I am totally clueless of this case and delisting thing.

A short note on this would help.


Anonymous said...

Hi Neeraj, not so sure if you followed what I've stated. To simplify, Disa is so expensive that for it to trade at a sensible valuation, it will have to start trading at book value, which would mean that it needs a 90% correction. Trust clear now.

Why do you think it is not expensive ? Am referring to your conversation with your friend where you've stated
that the scrip is not expensive.


jagadish said...

If no interested buyer turns up for whole quantity up for sales and offer for sale doesn't go through? I think they must delist then! or they can go Fresenius Kabi Oncology way (where co did a preferential allotment to an outsider to dilute promoter holding)

Neeraj Marathe said...

Hello Avadhut,
Plz read my original post on Disa. I think it will be pretty clear. Still if there is any problem, u can email me anytime..

Yes sir, pretty clear now. Disa should drop 90%, to book value. I honestly hope it does!

Completely agree with you. there are multiple angles and possibilities here..much more than what meets the eye i think.

Dayanand Deshpande said...

Hi Neeraj,
What is your guess on the floor price? Would you base your call (buy, hold or sell) based on the floor price? what conclusions will you draw from the floor price?

Neeraj Marathe said...

Hello DD,
No idea about the floor price. If this is not a negotiated deal, the floor price will have to be at a substantial discount, since the stock is very illiquid and not well known.
We will have to wait and see..

Ketan Shah said...

On public demand, need research on new companies! your earlier posts have been interesting and a good learning experience:)

Neeraj Marathe said...

Thank you sir..will try my best!

moneeeee said...

hi Neeraj,
Thanks for the wonderful blog.
Do you have any more update in a years time on DISA as you might have attended more AGM's now.

Neeraj Marathe said...

Hello Moneee,
Not much further updates on the same really..