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Mahindra & Mahindra to acquire 38% stake in EPC Industries
The board of Mahindra and Mahindra (M&M) has approved the acquisition of 38% stake in
EPC Industries (EPC), one of India’s top five companies in the micro-irrigation space for
`43.53cr. This acquisition will help M&M foray into the fast-growing micro-irrigation space.
Noticeably, this is a related diversification strategy as M&M already has a major presence in
the farm equipment sector through manufacturing of tractors. The acquisition will help
synergise the distribution strength of M&M with the industry expertise that EPC possesses.
As part of the deal, M&M would subscribe to 65,58,065 fully paid-up equity shares of face
value of `10 each of EPC, on a preferential basis, at a price of `66.10/share. Further, in
compliance with SEBI guidelines, M&M will launch an open offer on April 6, 2011, to buy an
additional 20% stake in EPC at `66.55. The open offer closes on April 25, 2011. On the
completion of the preferential allotment and the open offer, M&M would be acquiring the
management and control of EPC and would be classified as its promoter.
EPC is one of the pioneering companies in the micro-irrigation sector. The company currently
operates in more than 12 states and sells drip irrigation systems, sprinkler irrigation systems
and industrial pipes. During FY2010, EPC reported turnover of `75cr with net profit of
`0.95cr.
We believe the acquisition will not have a material impact on the financials of M&M and,
therefore, we have not accounted for it in our valuation. We maintain our Buy rating on the
stock with an SOTP Target Price of `794
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mahindra & Mahindra to acquire 38% stake in EPC Industries
The board of Mahindra and Mahindra (M&M) has approved the acquisition of 38% stake in
EPC Industries (EPC), one of India’s top five companies in the micro-irrigation space for
`43.53cr. This acquisition will help M&M foray into the fast-growing micro-irrigation space.
Noticeably, this is a related diversification strategy as M&M already has a major presence in
the farm equipment sector through manufacturing of tractors. The acquisition will help
synergise the distribution strength of M&M with the industry expertise that EPC possesses.
As part of the deal, M&M would subscribe to 65,58,065 fully paid-up equity shares of face
value of `10 each of EPC, on a preferential basis, at a price of `66.10/share. Further, in
compliance with SEBI guidelines, M&M will launch an open offer on April 6, 2011, to buy an
additional 20% stake in EPC at `66.55. The open offer closes on April 25, 2011. On the
completion of the preferential allotment and the open offer, M&M would be acquiring the
management and control of EPC and would be classified as its promoter.
EPC is one of the pioneering companies in the micro-irrigation sector. The company currently
operates in more than 12 states and sells drip irrigation systems, sprinkler irrigation systems
and industrial pipes. During FY2010, EPC reported turnover of `75cr with net profit of
`0.95cr.
We believe the acquisition will not have a material impact on the financials of M&M and,
therefore, we have not accounted for it in our valuation. We maintain our Buy rating on the
stock with an SOTP Target Price of `794
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