- Part 1 - In a reverse merger a private company merges with a publicly listed company that doesn’t have any assets or liabilities. The publicly traded corporation is called a “shell” since all that remains of the original company is the corporate shell structure. By merging into such an entity the private company becomes public. After the private company obtains a majority of the public company’s stock and completes the merger, it appoints new management and elects a new Board of Directors. Though I believe many options are open for BCCL to list, am not sure that the BCCL will take this route. By definition in case of reverse merger the acquisition of a public company by a private company, allowing the private company to bypass the usually lengthy and complex process of going public. I don’t think that BCCL is in hurry to list since we have seen that they have so far resisted the idea of listing. According to Times Group insiders, internal valuations attach the company at up to $30 billion (Rs 1,20,000 crore), while media analysts said that would be ambitious pricing since revenue is only $1.1 billion, and profit $0.3 billion. So its kind of vague predictions out there. I am sure BCCL will attract premium valuation as compared to its peers. BCCL has diluted equity in individual businesses that are a part of the group: • Zoom Entertainment Television: 25 percent to Merrill Lynch for $30 million; valuation of $120 million • ENIL (Radio Mirchi, Times OOH) - BCCL owns 73.2 percent; raised Rs. 194.4 cr via an IPO • Times Internet Ltd : raised $7 million from Westbridge Capital (now Sequoia Capital India) Bennett's promoters, the Jain family, have apparently maintained in the past that the very profitable publishing house didn't need to raise external capital to fund its expansion and we have to agree to that. Indu Jain, the owner of BCCL, is the second richest woman in India. Her wealth is estimated at US $ 4.4 billion (Rs 17,307.4 crore), according to Forbes. So I assume that valuation of BCCL will be somewhat close that figure. Part 2 There are various reason a company chooses to go for reverse merger. Some of them elucidated here. Lets discuss them with reference to the current rumors of Bharat Nidhi merging with BCCL. Argument: The ability for a private company to become public for a lower cost and in less time than with an initial public offering (IPO). When a company plans to go public through an IPO, the process can take a year or more to complete. This can cost the company money and time. With a reverse merger, a private company can go public in as little as 60 days. Ans: Since both are privately held there is no reason that they will go for reverse merger. Since they have waited so long and resisted listing, I am sure that they can surely wait for just listing that in appropriate way. Argument: Public companies have higher valuations compared with private companies. Some of the reasons for this include: greater liquidity, increased transparency and publicity, and they have a faster growth rates compared to private companies. Ans: Since both are privately held there is no reason that they will go for reverse merger. Argument: Reverse mergers are less likely to be canceled or put on hold because of the adverse effects of current market conditions. This means that if the equity markets are performing poorly or there is unfavorable publicity surrounding the IPO, underwriterscan pull the offering off the table. Ans: Since BCCL and Bharat Nidhi, both of them enjoy a dominant shareholding of the promoter group, there will be no hindrance to its reverse merger. Argument: The public company can offer a tax shelter to the private company. In many cases, the public company has taken a series of losses. A percentage of the losses can be carried forward and applied to the future income. By merging the private and public company, it is possible to protect a percentage of the merged company's profits from future taxes. Ans: Since both are privately held, there is no reason that they will go for reverse merger. Moreover, there are no issues of taking the benefit of accounting treatment of losses. So the above points somewhat validate that the reverse merger is something BCCL will surely not opt for. Lets now see why they wuould want to go for reverse listing. We have seen in the case of Essar Telecommunications which is merging into its listed group company India Securities Ltd. to discover the true value of its stake in Vodafone Essar. Vodafone had objected to the move, saying it is concerned that the value of India Securities after the merger could be misinterpreted as a fair market value of unlisted Vodafone Essar. So, if for god’s sake Delhi Stock Exchange starts, and they might reverse merge BCCL to discover the potential valuation of BCCL. Since they are the major holders in both companies, the valuation can be manipulated. Most important: The shares of Bharat Nidhi and other group companies which holds stake in BCCL such as PNB Finance, Camac Commercial etc are heavily bought by some investor group. I don’t know if I am allowed to mention the name, but I think, in public interest I will. A group called Shri Parasram Holding (based in Delhi) and its associates holds substantial stake in all these above companies. They are kind of market makers in Bharat Nidhi, PNB Finance, Camac Comm etc. So some of the price rise and artificial volumes you see in Bharat Nidhi and PNB are kind of controlled by them and their associates. Hence I would advice that to take cognizance of the series of completely false and baseless rumors. I think it will take some time to play out the BCCL and Nidhi stories. Let’s wait till then.
- Show quoted text ---------------------------------------------------------------------------------------------- We are most grateful , as ever , to Mr. Satyakam Mishra for sharing with us this very important update. Ashwani Kumar Aggarwal
- February 12, 2011
- Thank you very much Shri Satyakam Mishraji for the valuable information.
- February 12, 2011
- I dont see part 2 of my post. Mr Agarwal, please look into this.
- February 14, 2011
- I am eagerly waiting for part 2 of Shri Satyakam Mishrajees Note.In the meantime there is News in Bloomberg site today that BCCL IPO could be in next two years. Please find in that site for deatails
- February 16, 2011
- Shri Agarwaljee,Can you kindly arrange to post part 2 of Shri Styakamjees message
- February 18, 2011
- Bharat Nidhi Ltd. Buyer @ Rs6900
- February 20, 2011
- Shri Agarwaljee,is part2 of Styakamjees message lost or missing.Why no action yet?Sir,?
- February 20, 2011
- Respected Satyakamjee, can you follow up for publication of that part2 of your comments which is not done yet even after several days,and is being ignored. I value your learned views immensely and hence this repeated request,
- February 21, 2011
- Dear Mr Vishwaasp, I dont have the copy of the same and hence request you to follow with Mr Agarwal.
- February 21, 2011
- Dear Satyakamjee it is surprising that there is no response from Blog administrator as yet even after so many days .I am wondering why
14 Years Old With 15000 Posts in Archives THE ONLY Authentic RARE INDIAN SHARES Web Site Buy Sell Contact Delisted Unlisted , Unquoted , ,Untraded Shares Stocks Suspended Regional Stock Exchanges , Delisting , Closed . Vanished ,Disappeared ,Tremendous Hidden value , ESOP, Illiquid , Pre IPO ,.Rarely Traded , Antique collectors off beat Current Rates , Best Prices , Bids ,Offers, Brokers , Dealers ,Buy , Sell Physical , Problematic Transfer Transmission
Bharat Nidhi :Thanks for both the parts and thanks for the elaborate mateterial and studies, But an important correction please.Bharat Nidhi is not a private company. It is public company listed in Delhi Stock Exchange .Quotations are not there because there is no trading in Delhi stock Exchange. So Bharat Nidhi being apublic Co what are chances/possibilities of reverse merger ?
ReplyDeleteWE READ MANY ARTICLES ON MERGER,REVERSE MERGER OF BHARAT NIDHI,PNB FIN
ReplyDeleteWITH BENNETT COLEMAN.BUT IN MY VIEW ,IN BOARD MEETING BOTH BHARAT
NIDHI PNB FIN & OTHER HOLDING CO CAN DECIDE TO DISTRIBUTE THEIR
HOLDING IN BENNETT COLEMAN , TO THEIR SHAREHOLDERS
Why should the Management do this ? They will never do such a thing as there is absolutely no compelling reasons for them to do this.
ReplyDeleteeverybody is expressing their own thinking . nobody is near to reality.
ReplyDeleteMr satyakam Mishra said totally his view.
all things are available in Company Law Bord website.
just check all documents of BCCL on website and comment.
you can take any Chartered Accountant help for getting this information by paying some nominal fee.
as per Satyakam ji,price rise is just because of Parasram artificial trading.
ReplyDeletebut nobody knows that Parasram has not sold any single share. Nobody will be interested in price ragging by putting crores rupees.
why Parasram will take substantial stake in company ?
think and think again.
take decision yourself .
I do not know how anyone can state whether Parasram has sold a single share or not? Have they given details of their operations to the writer to make it public? Will they reveal it publicly or like others to speak for them ? Is this not simply guesswork about business operations of others in a way favourable to and to suit ones own thinking.
ReplyDeleteThere are many stories circulating about ESOPS ,a very liberal bonus issue , stock split to Re. 1 and IPO regarding Bennett , Coleman And Company Limited .
ReplyDeleteReference is being made to some Posts in this regard on the site jeeteygakaun .
The management of Bennett Coleman and Co. Limited should , in the interests of maintaining transparency and good business ethics should state the true facts .
Attempts are on to push up price of Bharat Nidhi .Today 3 a capital has given their selling rate as Rs7600 while they were offering to buy the same at rs5200 couple of days back.
ReplyDeletePlease click by copying this URL
ReplyDeletehttp://www.bloomberg.com/news/2011-02-15/times-publisher-bennett-coleman-said-to-plan-india-ipo-in-next-two-years.html
@ Vishwaasp @ Satyakaamji : Well the part 2 emphhasis on the fact that BNL is private which is not true. Another BNL is not making losses so the tax shelter theory also does not hold. however, quick listing @ lower cost could be a good enough reason. I understand that of Bharat Nidhi, which has 18-20% external shareholding (Non-promoter) about 4-5% has been cornered by the Delhi based entity so named. Another 8-10 per cent is supposedly held by shareholders who are not traceable. so that would leave a small float of 4-5% in the market on a share base of 30L shares.
ReplyDeleteNow the question is who would accumulate shares of an illiquid stock which is worth several tens of crores. and why. so there is some fire cooking for sure and events as they unfold tell a story.
Is the delhi based group buying on behalf of promoter group? Or for someone who is in know of the whole operation. Either way it is big money at stake. god knows? But assuming that it is an average price of 3000-4000, (this is not a wild guess) the cost of acquisition runs into tens of crores.
So i guess it is wait and watch for the time being.
Very good analysis by you indeed! Weldone!The ongoing progressive mopping up of this ill liquid share of Bharat Nidhi ltd deploying tens of crores does indicate towards unfolding of some far reaching developments shortly.
ReplyDeleteI am giving below some useful details in respect of Bharat Nidhi shares and their valuation based on their holding of Bennet Coleman shares :
ReplyDeleteAs on 31st July, 2005
Bharat Nidhi Total Shares 29,19,722
Equity Capital of BNL 2,91,97,220
BCCL No. of Shares 3,18,83,936
BCCL Shares owned by Bharat Nidhi 77,82,400
% Holding of BNL in BCCL 24.41%
NAV per share of BCCL as per ENIL prospectus 24,118.20
Aggregate Book value of BCCL 7,68,98,31,45,235
Proportionate Share of BNL in BV of BCCL 1,87,69,74,79,680
NAV Per Share of BNL (considering BCCL alone) 64,286
The ENIL (Radio Mirchi's) IPO offer document is available on following link : http://www.moneycontrol.c om/news_html_files/pdffil es/mar2007/Entertainment% 20Network.pdf
NAV per share of BCCL as per ENIL prospectus NAV % increase
2005 24118.2 30%
2004 18563.2 38%
2003 13441.0
Before declaring so to SEBI and to public, detailed exercise must has to been done. Based only on the NAV of 2005, the valuation goes very high.
Now with bonus of 1:8, no. of shares held in BCCL have become 9 against 1. Then share of Rs. 10 face value has been split into 10, share allotted under ESOP is for Rs. 446 which indicates value of per share of BCCL 446 X 10 X 9 = 40,140 which is quite reasonable when compared to value of Rs. 24,118 in 2005, keeping in view progress made by Bennett Coleman during last 5 years. Based on this value of Rs. 40,140, value per share of BNL will be Rs. 106,992.
I welcome view of others and if someone disagrees, let him challenge these figures.
Ms Renu,
ReplyDeletethnx for information.
I have seen prospectus of ENIL.
You are very right.
The value of shares Rs 65000/- aprox as per balance sheet filed in 2005 ans as on today its value would be around more then Rs one lac.
Cheers stakeholders !!!
But holding companies shares prices are quoted at heavy discounts in market. EG Tata Investment, UB Hldings Bajaj Holdings etc. From this angle whta could be rerated price of Bharat Nidhi ?
ReplyDeleteAssuming the intrinsic ( NAV ) of one share of Bennett , Coleman and Co.( Rs. 10 paid , Equity : Rs. 32 crore ) to be Rupees One Lakh , the NAV of one share of Bharat Nidhi would be Rs. 2 lakh + . In such a scenario the market price of one share of Bharat Nidhi should be around Rs. 20 ,000 to Rs. 25 ,000.
ReplyDeleteThankyou Aswanikumar Agarwaljee,that is a sound and fair assessment of rerated Bharat nidhi share.
ReplyDeleteI wish to buy Bharat Nidhi Shares @ 10500/-( ANY QUANTITY)
ReplyDeleteplz send your offer at following mail id
jaibeerjain@gmail.com
WRITE MAIL with shares QTY
Jaibeer Jain
Mr. Jaibeer : Please provide your telephone also. to reinforce the genuineness of your bid.
ReplyDeleteBlog Writer
What happen with the IPO of BCCL?
ReplyDelete