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Sterlite buyback: Deviant response

S. Vaidya Nathan

THE broad trend in the markets continues to be more of the same evident in recent months. Listless trading is what it is. While there be little to excite the traders and speculators, investors in specific companies may be called upon to make some decis ions linked to corporate announcements.

Quite a few buyback and open offer announcement have been floating around. None more interesting than the ones of the Sterlite group.

The market has responded enthusiastically to the buyback announcement of Sterlite Industries. The company has planned to buyback 13 million shares of Rs 5 each at a maximum price of Rs 200 per share. The buyback is to be routed through the secondary ma rket route. It is to be done in a compressed time-frame in August-November or till 25 per cent of equity is bought back.

To this extent, the proposal is slightly different from the buybacks in recent time. Despite this aspect, the stock has moved up smartly by around 25 per cent. This is attributable to the sizable difference between the maximum price fixed and the marke t price. But the uptrend may somewhat be abated from here on since the actual buyback may take place at a lower level.

In sharp contrast to the trends in Sterlite Industries, the buyback announced for Sterlite Optical has evoked a lukewarm response. Though the stock did move in the run-up to the announcement, subsequent trends have been week. The buyback price in this c ase was fixed at a maximum of Rs 250 per share. With a small 20 per cent gap as compared to the market price, the buyback is unlikely to tickle any further uptrend in the stock price of Sterlite Optical.

The Ranbaxy Laboratories' stock has been on a belated recovery phase. While quite a few pharmaceutical stocks such as Dr Reddy's, Sun Pharmaceuticals and Cipla have been on the buy list and posted good gains, Ranbaxy missed out to a large extent. The Ke tan Parekh factor was holding behind the stock. Now it seems to be getting some interest. In the past 10 trading sessions, the stock has gained 12 per cent. But despite this gain, its relative valuation vis-a-vis Dr Reddy's and Cipla is not what it used to be. However, existing shareholders can stay invested as over a period of time, the valuation could improve.

Bad times beckon: In the bull market of 1999 and 2000, there were quite a few stocks that soared way beyond levels in the past. But most of these have fallen with a thud and are still falling. Stocks such as Television 18 (TV 18), Agro Dutch Foods and G.V. Films fall in this category.

From levels of over Rs 1,850, TV 18 is now at Rs 53 and has suffered a 20 per cent dent in the last ten trading sessions.

Other gainers/losers: Some of stocks that continue to be on an uptrend without any publicly known reasons are Albrigt Wilson, Jammu & Kashmir Bank, Gilt Finance, SmithKline Consumer, Bajaj Auto and Reckit Benkiser. Stocks such as SKF Bearing and HDFC h ave also been in an uptrend.