Minda Corp, Pricol surge up to 6% amid stake sale buzz

Pricol said the promoters have absolutely no intent of undertaking any secondary sale of promoter stake nor does the company have any intent to raising equity capital of any form.

Shares of Minda Corporation (Rs 226.15) and Pricol (Rs 219) surged up to 6 per cent on the BSE in Friday’s intra-day trade amid reports that Minda Corporation plans to buy around 15.7 per cent stake in Pricol for Rs 400 crore at Rs 209 per share.

At 09:23 AM; Pricol had erased its intra-day gain, and was up 0.46 per cent at Rs 209.25, after the company’s promoter denied the stake sale plan. Minda Corporation was up 2 per cent at Rs 217.65 on the BSE. In comparison, the S&P BSE Sensex was down 0.50 per cent at 61,021.

The promoters have absolutely no intent of undertaking any secondary sale of promoter stake nor does the company have any intent to raising equity capital of any form as the company has strong financial fundamentals and healthy cash profits that will meet the needs of capital for its future growth, Pricol said on clarification of media news.

The promoters and the management stand committed to its stakeholders and are bullish about the growth prospects of the organisation combined with a firm financial footing, the company said.

“As Managing Director and representative of the Promoter Group of Pricol Limited, I would like to reiterate that the Promoter group stands absolutely committed to the company and its future prospects,” Vikram Mohan, Managing Director of Pricol said.

“We have turned around the company in the last few years by making it net debt free and have set it on a firm growth path, and proved customer confidence with a healthy order book, while we continue to invest significantly in both product and process technology to keep us ahead of competition”, Vikram Mohan said.

ICICI Securities believe this investment will come in the form of fresh equity infusion in Pricol (market cap: Rs 2,500 crore) as promoter stake is already low at ~36.5 per cent. Overall, this will aid Pricol towards funding its capex for its future growth requirement amid ambitious targets of Rs 4,000 crore topline by FY26E vs. ~Rs 2000 crore expected in FY23E.

From Minda Corporation's standpoint this acquisition seems less rewarding in the near term with Pricol expected to earn ~Rs 120 crore of PAT in FY24E resulting in ~5 per cent return on investment as profit from associates. Further, to fund this, Minda Corp has ~Rs 145 crore of unutilised proceeds from QIP issued in FY19, the brokerage firm said in a note, stating they await official communication on the same to gauge further financial implication for both entities.