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 The Equity Desk Forum :Investment Ideas - Creating winning portfolios! :Stock Synopsis
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kannanravi1
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Quote kannanravi1 Replybullet Topic: Rane Holdings
    Posted: 02/Dec/2007 at 1:30am
Also Rane Holdings looks undervalued. Haven't looked too much into it but they have around 50% holding each in RBL and Rane Engine Valves. RBL has a m.cap of 125 cr and REV has 142 cr. RHL should thus have about 133.5. RHL is currently valued at 137 cr. RHL has the following other investments (info from press release) : "54 per cent in Rane Madras (RML), 52 per cent in Rane Engine Valves (REVL), 79 per cent in Rane Diecast Ltd (RDL), 43 per cent in Rane Brake Linings (RBL), 36 per cent Kar Mobiles (KML) and 100 per cent in Rane Investment Ltd (RIL)."
 
Looks like RHL is available at about the price of two of its holdings: RBL and REV. Everyting else comes for free at this price!!
 
Thoughts anybody??
kannan
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Vivek Sukhani
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Quote Vivek Sukhani Replybullet Posted: 02/Dec/2007 at 7:35am
Hi Kannanravi,
 
I will accumulate more of RBL. I am ignoring RHL for the time being as I think I can get the tickets of RHL through RBL's restructuring. I think RHL's shareholders should book out and get into RBL as they can get 75 p.c. of their holding in RHL ( in terms of no. of shares) when the deal goes through and in addition get a wholesome quantity of Rane Brake Products limited.
 
It works like this:
 
RBL and RHL have very similar price. Now, for every 100 shares of RBL you will get 100 shares of Rane Brake Products limited( transferee company) and 75 shares of rane Holdings Limited. Now suppose a person has 100 shares of RHL then in case he sells off his holding in RHL and gets into RBL he will ensure that he gets back 75 p.c. of his original interest in RHL as well as gets 100 tickets of rane Brake Products limited. Tell me, is this not a good bargain???????
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kannanravi1
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Quote kannanravi1 Replybullet Posted: 03/Dec/2007 at 9:23pm
Vivek,
         It does sound good to exit RHL and enter RBL based on your arguments. As you said for the same price of 100 RHL one can get 100 RBL and 75 RHL. This almost seems too good to be true based on current prices of RBL and RHL. But any idea what the price of RBL will be post restructure? Typically how do you predict post restructure prices? Based on my understanding, they are planning to transfer all investments in sister concerns to RHL and will float a new company to house the core oprations of RBL. As of Mar, 2007 RBL's annual report shows about 48 crores in investments (12 crore in Rane die cast, 15 crore in REV, 21 crore in Rane Investments). I would imagine these would be transferred to Rane Holdings. RBL will thus have post restructuring equity of (116 cr - 48 cr) = 68 cr. The current mkt cap is 173 cr resulting in a P/B of 1.49. If same P/B remains for the new RBL then the mkt. cap would be (1.49 * 68) = 101.3 cr. Hence a shareholder who now buys RBL at 173 cr will be entitled post restructure for new RBL of 101.3 and 75% of RHL (mkt. cap 137 cr). Hence a total of 203 cr. This is a solid 17.3% upside from today!! (I have conservatively assumed no upside in mkt cap for RHL post restructure in my calculations). Based on this calc, I think we should definitely accumulate. Does this calc make sense? Have I missed anything?
 
Kannan
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s_praharaj
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Quote s_praharaj Replybullet Posted: 03/Dec/2007 at 9:27pm

Earlier there were a lot of cross holding among the Rane group of companies. The company is restructuring it bringing everything under the umbrella fo Rane Holding. There were three stages in which the restructuring was to be completed. Out of the three, they have already completed two stages. Third stage is yet to be completed after which all the Rane group companies will come under Rane Holding.

None the less the companies are all well manged. The div payout is good. But the sector does not have market fancy. I bought this share with a lot of expectations some 2 year back and sold it some six months back with a marginal loss.

 
Shashi Praharaj
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Vivek Sukhani
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Quote Vivek Sukhani Replybullet Posted: 03/Dec/2007 at 8:21am
Originally posted by kannanravi1

Vivek,
         It does sound good to exit RHL and enter RBL based on your arguments. As you said for the same price of 100 RHL one can get 100 RBL and 75 RHL. This almost seems too good to be true based on current prices of RBL and RHL. But any idea what the price of RBL will be post restructure? Typically how do you predict post restructure prices? Based on my understanding, they are planning to transfer all investments in sister concerns to RHL and will float a new company to house the core oprations of RBL. As of Mar, 2007 RBL's annual report shows about 48 crores in investments (12 crore in Rane die cast, 15 crore in REV, 21 crore in Rane Investments). I would imagine these would be transferred to Rane Holdings. RBL will thus have post restructuring equity of (116 cr - 48 cr) = 68 cr. The current mkt cap is 173 cr resulting in a P/B of 1.49. If same P/B remains for the new RBL then the mkt. cap would be (1.49 * 68) = 101.3 cr. Hence a shareholder who now buys RBL at 173 cr will be entitled post restructure for new RBL of 101.3 and 75% of RHL (mkt. cap 137 cr). Hence a total of 203 cr. This is a solid 17.3% upside from today!! (I have conservatively assumed no upside in mkt cap for RHL post restructure in my calculations). Based on this calc, I think we should definitely accumulate. Does this calc make sense? Have I missed anything?
 
Kannan
 
I worked out a bit differently. I thought that this restructuring implies that I will be getting 100 tickets of rane Brake Products Limited for just 25 tickets of rane Holdings Limited. thats because in case I get off from rane Holdings and move onto rane Brake Linings, I will be getting 75 tickets of rane Holding post restructuring. So, that would mean for just 25 tickets( 100-75) I will have 100 tickets of rane Brake Products Limited. I will work out the details based on market capitalisation and post it here only.
 
Also, I generally tend to load dogs onto my portfolio. I have a few odd tickets of Voltas which I will now exit and make a move to RBL. Dividend mongering is all what I know and at times it does pay extremely well to be aggressive. Am also readying my guns on Sundaram Brake Linings Limited.
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