TTK Prestige - Event Update: Cartica Capital takes stake in TTK Prestige - Cholamandalam Securities

Cartica Capital, an emerging market focused long-only fund management company, has taken a substantial stake in TTK Prestige Ltd. The promoters have sold 0.35mn shares to Cartica Capital at INR 3,550/share and in addition to that the company will issue 0.3mn of fresh shares to Cartica Capital on a preferential basis at the same price, subject to the approval of shareholders and applicable regulatory clearances.

Post fresh issuance of shares and promoter's stake sale, Cartica will hold ~5.6% stake in TTK Prestige and the promoter holding will reduce to ~70% from 74.96% earlier.

Through the fresh share issuance, the company will raise INR 1.06bn, which would be utilized for general corporate purpose including retirement of debt. As on 31st March 2013, company had a debt of INR 1,145.1mn (Long term debt: INR 9.6mn and Short term debt: INR 1,135.5mn) and a cash balance of INR 325.5mn. The fresh equity issuance will marginally dilute the earnings (~2.6%).

Valuation: We retain our view on the stock; however we have adjusted the earnings and target price to factor in the equity dilution. At CMP the stock is trading at 19.9X to FY15E earnings. We have arrived at a target price of INR 3,904 based on 22XFY15E (PEG of 0.89) and assign an OUTPERFORMER rating.

Risks: The downturn in economy leading to deferring discretionary purchases and down trading, competition from both foreign and domestic player, volatility in prices of raw materials.

Source : Equity Bulls

Keywords