March 5, 2010

A delisting idea – Sulzer india

I had analyzed sulzer here. I had written the following

Sulzer has tried to delist the company in the past and current holds 80% of the stock. I will have to stretch my imagination on the point, that the company will suddenly start looking at improving the returns for the minority shareholder. In such a scenario, it is quite difficult to put an appropriate number on the intrinsic or fair value of the company.

Well, one part of the comment came through – the company
announced delisting yesterday. I had also written that it is difficult to put an appropriate number on the fair value. That did not stop me from evaluating the stock. I have uploaded a detailed analysis here.

I typically use this spreadsheet to do a detailed analysis of a company to ensure that I am evaluating the company from all aspects (I need to get a life !!)

My fair value estimate of the company is between 1250-1300 and it remains to be seen if the stock will appreciate still further in response to the delisting offer. You can read the guest post by ninad on the delisting framework here.

I have been building a position in this stock for quite some time now and have built a 60% position ( I am too slow !!). I am definitely pleased with this outcome. The stock however is now a delisting play and my approach will be different. It is likely I may exit the stock if the price approaches my estimate of fair value

An offer to my broker
I recently opened a new account and have a new broker. The broker is quite good and provides me good service. To appreciate the business he gets, he has been sending me 4 line stock recommendations. For ex: One of the recent recommendations was Tata motors.

I could not believe that someone would buy a stock based on a 4 line recommendation – apparently quite a few do. I think people do more research when buying a pressure cooker than a stock !

My offer to my broker is (in jest) – if you don’t give me advise and don’t send me recommendations, I will give you 1% extra commission on my trades


aneel said...

That's nice to hear that your analysis on de-listing is coming to reality. Interesting to see the de-listing price offer and your analysis on it, so will be looking forward on further posts on Suzler.

Anonymous said...

Hi Rohit - Super fast!

In one of my previous comment on a different post - I indicated that Dunlop India announced delisting. But actually it was Goodyear India.

My apologies!


Ravi said...

Hi Rohit,
In your analysis (anal) worksheet you have project the sales and I see that the sales growth fluctuates. May I know how this projection is done? In case of Sulzer the past sales growth has been erratic..It is apparent you did not take long term sales growth and then projected it. So, I am curious about your method of sales growth projection as I have noticed that you have entered some absolute numbers in every year sales. It would be great if you can throw some light on this.
By the way, I luv your punchline of paying the broker 1% more commision if they stop providing your recommendations.

Oracle said...

Maan gaye ustad...

I am happy that your analysis for 5 months back came true.

I also like comment about broker / share buying and pressure cooker buying comparision.

Anonymous said...

dear rohit,
your prvious broker is the same as mine
any specific advantage of the new broker
is he the same guy who sys knowledge first
also, when is ur complimentary paid analysis coming through
man, u r great i am ur fan always

Vic said...

Hi Rohit,

You should know this by know that I'm one of your biggest fan..:-)

But one thing I'm having hard time to understand is when to buy in some cases. Seems like we, readers always lag behind. I recall you had shared about your Maruti and CRISIL position buildup when they had fell. But they had already gone up when you posted about it.

Same case seems to be with Sulzer. There wasn't any indication at the time of analysis..:-)

Yes, you make it clear every time that you won't disclose when you're buying or selling.

You have already implemented the idea of sharing the detailed reports with the readers who donate to CRY. But will we ever get a PAID (doubt will be free :-)) service where we Buy/Sell when Rohit Chauhan does? :-)



Rohit Chauhan said...

Hi aneel
i am still tracking the company and have to decide if i will participate in the offer or exit before that. it will depend on the price action


Rohit Chauhan said...

Hi prashant
let me check on the delisting offer and get back

hi ravi
let me put a post on that. in most cases it depends on the history of the company , but in some such as sulzer if the company is changing , it depends on my own outlook the end it is a subjective exercise

i would suggest you look at the sensitivity analysis where i try to compute fair value with various assumptions of sales growth and NPM


Rohit Chauhan said...

Mr oracle - thanks for the comment

hi anon - for now all analysis is free :)

Rohit Chauhan said...

Hi vic
main reason for taking my time is to avoid dissapointing other , but will happen soon.

i posted on crisil and maruti before they rose ..i give fair value estimate all the time ..your job is look at that and the price, and if you are convinced by the analysis then buy when the difference is high

so the information is there ..will need a little bit of work my friend :)

again i still owe you and others one idea for the donation ..i was thinking of sulzer but did not as i was not convinced enough hindsight it always looks perfect, but then one can operate that way

Mansukh. M said...

The company board has approved delisting price of Rs 870 per share.
Please air your comments about what could be course of action.

Rohit Chauhan said...

Hi mansukh
that price is the floor ..that is not necessarily the price it will delist. thats a seperate exercise one has to


Vic said...


It is only in some cases that we don't have enough information to make the move.:-)

I will wait till your eBook comes out to learn about calculating intrinsic value and related stuff.. I want to test you teaching skills..:-)



anurag said...

Dear Sir,

This is with reference to your post 'Art of not investing',I wish to state that art of not investing is more tough than Art of Investing.

I again repeat that I understand you do not believe much into TA and do not concerned much into daily up and down in markets,but then also I wish to state that the Markets never fall when Retail are holding PE's or are short on NF.

I do not wish to shoot from the hip,but in all likely hood markets are poised to make even new highs in next 20-40 days,then the plug will be pulled in decent and nice manner.The TA gives a No. of 5400+ on Nifty.

Anurag Awasthi

Saif said...

hello sir..
how do we get financial data of companies for past 10 years or more..most companies list max only past 3 years data and mcontrol and others have max 5 years..
what is your data source..could you please share some useful links.

Rohit Chauhan said...

Hi anurag
i am agnostic about market levels ..have no specific views either ways ..against or for. well if the market rises, then i have quite a bit to sell :)
also just a suggestion - please call me rohit ..sir make feel older and wiser ..which i am not :)

Rohit Chauhan said...

Hi saif
i get the 10 yr data from the annual reports some cases i buy the annual reports from online services if they are not available on the site


Saif said...

thanks for your reply sir..i think there is business-beacon where one can get older reports for 10rs or so...will look into it