Bharati stock rises 17 pc after ABG pulls out of Great Offshore takeover race

MUMBAI: The Bharati Shipyard stock rose 17% as the country’s second-largest private shipmaker moved closer to the acquisition of Great Offshore. The Bharati stock closed at Rs 207.80 on Thursday against the previous close of Rs 177.60, as it launched an open offer to buy 20% stake in Great Offshore after rival ABG Shipyard pulled out of the race by selling its entire stake.

Although ABG’s offer also opened on Thursday, as announced, but logically has little value as it is priced 13% lower than Bharati’s offer of Rs 590 a share. Since ABG had already sold its 8% stake on Wednesday, it is unlikely to revise its offer, experts said.

For Bharati, the acquisition of Great Offshore, an oil drilling rigs provider, will boost order book because around 70% of Great Offshore’s fleet is due for replacement in the next two years, said analysts. These orders, now expected to be serviced by Bharati, are pegged at around Rs 3,000 crore.

Bharati, which owns 23% in Great Offshore, may be able to take up its stake to 43% in the company, if the offer is successful, for an investment of Rs 782 crore.

“At this price, Great Offshore is valued at around 12 times its estimated FY10 earnings. This acquisition may look expensive when we compare it with the valuation of (rival) Aban Offshore, which has a P/E of 10 times. However, Aban’s discounted valuation is justified by its debt burden. So we believe, that Bharati Shipyard would be acquiring Great Offshore at a fair valuation,” KR Choksey analyst Kunal Lakhan said in a report
on Thursday.

The stock market also cheered the exit of ABG Shipyard from one of the most closely-watched takeover battles in
corporate India. ABG, India’s largest private yard, gained 3.5% on BSE on Thursday after netting a gain of Rs 54.4 crore by selling its shares in Great Offshore. Mr Lakhan said it would be incorrect to say that ABG lost the battle. “The company made profit from its investment in Great Offshore over the past six months,”
he pointed out. ABG scrip closed at Rs 213.75 on BSE.

Karvy Stock Broking’s shipping analyst Vikram Suryavanshi said the orders from Great Offshore account for about 30% of Bharati’s order book. Bharati Shipyard has built 14 out of 41 offshore vessels for Great Offshore and is constructing two more offshore vessels for that company.

“Considering higher holding and business interest, we believe the revised open offer from Bharati shipyard is positive for Great Offshore,” he said in a report.
However, Great Offshore scrip did not witness much change during the day. It closed at Rs 513.70, up just 0.15%. “We believe the revised open offer at Rs 590 per share from Bharati provides an exit opportunity to
shareholders of Great Offshore,” said
Mr Suryavanshi.
The offers of Bharati and ABG will run parallel to December 22.