Indian Rayon scrip flags, Indo Gulf, Birla Global up

The markets gave a thumbs down to Indian Rayon but cheered Birla Global and Indo Gulf Fertilisers a day after the announcement of the mega merger of the three Aditya Birla group companies.

The stocks of Birla Global and Indo Gulf hit the upper band of circuit filters, while Indian Rayon dipped 6.32 per cent to Rs 578.40. The stock showed choppy trading and had gone up to Rs 650 in the day before losing steam.

The stocks of Birla Global and Indo Gulf Fertilisers gained by 10.46 per cent and 4.97 per cent to Rs 186.95 and Rs 150, respectively.

Market players said the merger plan had provided a lot of arbitrage opportunities, leading to volumes growth in these stocks. Indo Gulf saw volumes of 11.86 lakh shares (against a two-week average of about two lakh shares), while over 3.49 lakh shares (one lakh shares) changed hands in Indian Rayon.

The volumes of Birla Global were limited due to the stock hitting the circuit breaker in the first half of the session.

"This move is good for shareholders of all the companies involved in the merger. There is no point in the group pouring money into the fertiliser sector, which does not create returns that can be comparable with other sectors," DD Sharma, senior vice-president, Anand Rathi Securities, said.

Jigar Shah, executive director, KR Choksey Securities, added, "This is a great stride towards strengthening the group's presence in the financial sector. It has already made successful ventures in the mutual fund and insurance arenas. With the financial services sector looking forward to a great time, this consolidation is going to bring it rich dividends."

A senior analyst with a leading brokerage said, "It is a good step forward. There are a lot of limitations for the growth of the fertiliser segment, being still under a subsidy-based regulatory regime. The problems include regulatory restrictions on capacity expansion, control on prices and restrictions on consolidation."