BASF - Hold

Continues to look good



A part of the giant conglomerate, BASF India made big news a few months when it made its open offer. The open offer was not the big news but the fact that the its parent company, which was buying back the share revised the price from Rs 274 to Rs 300 a share after the offer opened on July 9. The offer price was hiked on July 14, two weeks ahead of the closing. And this strategy worked very well for the company. As against the target of acquiring 22.31% in the opne offer, it managed to acquire 18.49% of the shares. After this offer, which closed on 14th August, promoters holding - BASF Societas Europaea and BASF Aktiengesellschaft, stands increased at 71.18% from 52.69% and the floating stock has gone down from 47.31% to 28.82%.



The company has done so-so for the second quarter ended 30th September 2008. In absolute terms, there has been a YoY increase but when looks at the margins, there comes evidence of pressure. Net sales was up 27% at Rs.255.12 crore and operating expenses rose equally by 30%. EBITDA was up 10% at Rs.44.70 crore and PAT was up by just 8.34% at Rs.26.10 crore. OPM was down from 15.94% to 13.77% and NPM was down from 9.44% to 8.04%. On an equity of Rs.28.19 crore, its basic EPS currently stands at a very healthy Rs.9.26.



Compared to the first quarter,this has been a tepid performance and main reason for this is the overall drop in sales. Infact the Agricultural Solutions business which helped the Q1 performance was down in Q2- YoY and also QoQ. But the company has forewarned during the Q2 performance that contribution from this division was seasonal, so it may or may not contribute as significantly in Q2.



In September, its parent company made an open offer to acquire to acquire Ciba Holding AG, Basel, Switzerland, [CIBN], and was expected to make a public takeover offer to Ciba’s shareholders. BASF will pay CHF 50.00 in cash for each nominal share in Ciba.


Currently quoted at Rs.230, stay invested. It is one of those stocks, which are just to be held on to, not speculated upon.


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