Ashok Leyland touched a fresh 52-week low of Rs 47.25, falling 26.03 percent intra-day on Thursday. This came a day after the company board approved the firm’s plan to acquire up to 19 percent additional equity shares in Hinduja Leyland Finance, an NBFC, from the existing shareholders in tranches. The total consideration is around Rs 1,200 crore.
It may be noted that last month, the company said that during the current market slowdown, it has decided to conserve cost and reduce capex and investments. Earlier, the management said capex for the year will be Rs 1,200-1,300 crore as against the company’s initial plan of Rs 2,000 crore. For the next 4-5 years, routine capex would be around Rs 400-500 crore.
A month later, now, the company announced that it would invest Rs 1,200 crore to buy stake in HFL.
The proposed stake acquisition includes a seven per cent stake, which will be bought from Everfin Holdings, an arm of Everstone Group.
Last month company's Chief Financial Officer and Whole-Time Director Gopal Mahadevan said that Hinduja Group and Ashok Leyland has jointly decided to buy off Everstone's stake in the NBFC because Everstone had invested into this in 2012 or 2013 and while there was no written commitment to buy off the shares, but there was an in-principle agreement that in the event an IPO does not happen, an exit will be provided to Everstone. The acquisition will effect to consolidation of its holding in HLFL.
According to HLFL's annual report for 2018-19, Ashok Leyland, the promoter of the company has more than 61.84 per cent share in the company, while IndusInd International Holdings Ltd had 16.82 per cent stake, Everfin Holdings 6.99 per cent, Hinduja Power Ltd 6.55 per cent and Hinduja Ventures Ltd 3.46 per cent stake. Everfin as at April 1, 2017, held 13.99 per cent stake, and Hinduja Group picked up around seven per cent stake in 2017. The balance 7 per cent was to be take over in tranches starting from July, 2019 till May, this year.
Mahadevan today told in an analysts call that the picing was Rs 119 per share which is two times March 2019 books and the pricing rationale include that, while the markets have come off the company cannot take a long term potential valuation based on a current issues that is happening in the market.
Besides, HLFL's books has been growing significantly with the current year book is expected to be Rs 29,000 crore. The company has multiple options infront of it, including bringing in other private equity investors, for which the company is actively in discussion. There is also opportunity to pick up some very good assets in the current market, he added.
During the investors call on Thursday, Mahadevan said that the company tried roping in new investors since IPO did not happen, but even that also didn't materialise.
On Wednesday, the company in a regulatory filing said that its Board of Directors has approved to acquire upto 19 per cent additional equity shares in HLFL, from the existing shareholders, in tranches within a period of 12 months from the date of approval, subject to necessary approvals, consents, sanctions and permissions of the appropriate authorities. The cost of acquisition will be not exceeding Rs 1,200 crore, on cash consideration.
"The agreement(s) to acquire the equity shares in HLFL from the existing shareholders will be entered by the company in due course. As and when the company completes acquiring shares in tranche(s) and if the said acquisition exceeds two per cent or more of the equity shares of HLFL, the company will inform the stock exchanges, as required," it said.
While the company tried for an Initial Public Offer (IPO) twice, the market was not conducive and it did not made sense to conduct the IPO just for the sake of an IPO.
Share price of Ashok Leyland declined 25.25 per cent at tne closing of the market on Thursday, to Rs 48.10 per share, after hitting a 52 week low of Rs 47.25 during the day.
HLFL has registered a revenue of Rs 2560.64 crore in 2018-19 with a 30 per cent growth from Rs 1961.27 crore during the previous quarter. Profit after tax grew almost 51 per cent growth to Rs 275.64 crore in 2018-19 as compared to Rs 182.04 crore during the previous year.