Bhushan Steel is under NCLT and now it has been formally announced that Tata Steel is the highest bidder. To value any NCLT company two approaches can be adopted
1. Value of Assets per share less Liability
2. Earning Per Share
From Sebi rules two things needs to be understood
1. What is the max. equity percentage the new bidder can take in a listed company
2. What happens to the present equity
The Answer to above are
Q1. What is the max. equity percentage the new bidder can take in a listed company
Ans.1. Max.90% can be taken if certain specific conditions are met ELSE 75%
Conditions under which 90% can be taken are
A. Valuation of the company under NCLT as per valuation report on relevant date i.e. date on which COC approves the resolution is more then 1600 cr
B. Value of public share holding is not less than 400 cr
only if above two conditions are met then the new bidder can take 90% equity with a clause that the same will be brought down to 75% within a period of one year
In all other cases the max. that can be taken is 75% in a listed company.
Q2. What happens to the present equity
Ans 2. The present equity becomes either 10% of new or 25% of new depending the percentage taken by new bidder i.e max. 90% or 75%
In case of Bhushan steel following is the present scenario
Total number of equity shares are 22.65 Cr
Out of which the pledged equity of promoters with Lenders is 9.30 cr,
Un-pledged promoter shares which are with promoters but they have sold the same and have made them look public is 3.80 cr thus
Total with public is 13.35 cr and lenders 9.30 cr Total 22.65 Cr
Tata steel has offered 12.2% equity stake to Lenders that means total shares are 76.22 cr as against earlier 22.65 cr and new equity ratio is going to be
Tata Steel will have 53.57 Cr shares i.e. 70.29%
Lenders will have 9.30 Cr.shares i.e. 12.20%
Public will have 13.35 Cr. shares i.e. 17.51%
Now Tata Steel is offering Rs.36390 Cr. for 70.29% stake (53.57 cr shares) i.e. Rs.679 per share but funding of this 679 is expected to be done as 30% equity and 70% fresh debt in Bhushan steel thus Tata Steel will be infusing Rs.203 per share as equity i.e. Rs.10,875 cr. which they have already raised through recent rights issue of 12000 cr.
Now If Rs.36390 Cr. is for 70.29% then what is the 100% ...it will be roughly 52340 cr which is the net block value of bhushan steel in its last balance sheet thus TATA has valued Bhushan Steel assets at 100% of present net asset value.
Total shares issued are 76.22 cr thus Asset Value per share is Rs.686
Minus the debt per share which 70% of 36390 cr i.e. 25473 cr thus debt per share will be Rs.334
the net value per share will be 686 - 334 = Rs.351
Tata Steel is getting share value of Rs.351 by paying Rs.203
Rs.351 is value of Bhushan steel from Asset Valuation point
Now From earnings point what will be the EPS..??
if plant capacity is 5.6 million tons that can be expanded to 8 million tons and
Tata Steel is having captive iron ore mines thus have better EBIDTA margins which is considered highest for any steel company.........
Total no. of shares being 76.22 cr .........
thus the price depending upon EPS AND what PE the company gets the price can BE..................
Warning: All views expressed are my personal views and anyone reading the same should first verify the facts before making any conclusion.
1. Value of Assets per share less Liability
2. Earning Per Share
From Sebi rules two things needs to be understood
1. What is the max. equity percentage the new bidder can take in a listed company
2. What happens to the present equity
The Answer to above are
Q1. What is the max. equity percentage the new bidder can take in a listed company
Ans.1. Max.90% can be taken if certain specific conditions are met ELSE 75%
Conditions under which 90% can be taken are
A. Valuation of the company under NCLT as per valuation report on relevant date i.e. date on which COC approves the resolution is more then 1600 cr
B. Value of public share holding is not less than 400 cr
only if above two conditions are met then the new bidder can take 90% equity with a clause that the same will be brought down to 75% within a period of one year
In all other cases the max. that can be taken is 75% in a listed company.
Q2. What happens to the present equity
Ans 2. The present equity becomes either 10% of new or 25% of new depending the percentage taken by new bidder i.e max. 90% or 75%
In case of Bhushan steel following is the present scenario
Total number of equity shares are 22.65 Cr
Out of which the pledged equity of promoters with Lenders is 9.30 cr,
Un-pledged promoter shares which are with promoters but they have sold the same and have made them look public is 3.80 cr thus
Total with public is 13.35 cr and lenders 9.30 cr Total 22.65 Cr
Tata steel has offered 12.2% equity stake to Lenders that means total shares are 76.22 cr as against earlier 22.65 cr and new equity ratio is going to be
Tata Steel will have 53.57 Cr shares i.e. 70.29%
Lenders will have 9.30 Cr.shares i.e. 12.20%
Public will have 13.35 Cr. shares i.e. 17.51%
Now Tata Steel is offering Rs.36390 Cr. for 70.29% stake (53.57 cr shares) i.e. Rs.679 per share but funding of this 679 is expected to be done as 30% equity and 70% fresh debt in Bhushan steel thus Tata Steel will be infusing Rs.203 per share as equity i.e. Rs.10,875 cr. which they have already raised through recent rights issue of 12000 cr.
Now If Rs.36390 Cr. is for 70.29% then what is the 100% ...it will be roughly 52340 cr which is the net block value of bhushan steel in its last balance sheet thus TATA has valued Bhushan Steel assets at 100% of present net asset value.
Total shares issued are 76.22 cr thus Asset Value per share is Rs.686
Minus the debt per share which 70% of 36390 cr i.e. 25473 cr thus debt per share will be Rs.334
the net value per share will be 686 - 334 = Rs.351
Tata Steel is getting share value of Rs.351 by paying Rs.203
Rs.351 is value of Bhushan steel from Asset Valuation point
Now From earnings point what will be the EPS..??
if plant capacity is 5.6 million tons that can be expanded to 8 million tons and
Tata Steel is having captive iron ore mines thus have better EBIDTA margins which is considered highest for any steel company.........
Total no. of shares being 76.22 cr .........
thus the price depending upon EPS AND what PE the company gets the price can BE..................
Warning: All views expressed are my personal views and anyone reading the same should first verify the facts before making any conclusion.
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