MNCs get chance to hike stakes due to weak rupee

The rupee, which sank to a record low against the dollar on Monday, offers multinational companies a good opportunity to hike their stakes in Indian subsidiaries to 75%, a promoter’s upside limit, or delist as the fall in the rupee by 33% over the past two years makes such transactions cheaper.

Some of the likely open offer candidates include BASF India, Bosch, Clariant Chemicals, GSK Pharmaceuticals, KSB Pumps, Siemens and Stryrolution ABS, said Centrum Broking.

“Recently, the market witnessed few MNCs increasing their stake in their Indian subsidiaries at premium valuations. We believe more MNC companies would follow the same and increase their presence in the Indian markets (because of the cheaper currency),” Centrum Broking said in a note to its clients.

“Also, there exists an interest arbitrage opportunity, with India subsidiaries offering higher yields than the cost of borrowing in the US and Europe — the average three-year earnings yield of the top Indian MNCs is about 4.5%, while the cost of debt for their parents is about 1.5%,” said the broking firm.