Are owners of FDC Ltd, one of the steadiest pharma companies in the midcap space, looking for an exit option? A report in the Economic Times dated December 24, 2012 seems to convey this impression. The promoters of FDC have been trying to buy back shares from the stock market for the last couple of years and at different price levels, the maximum of which Rs 140 announced in 2011. But the low floating stock and the unwillingness of savvy investors to part with their holdings have thwarted the management efforts to either shore up their holdings or raise company valuations through a better earning per share as the number of outstanding shares reduces through extinguishment of shares purchased under its buyback programme. In the last five years, the company has managed to buy back about 85 lakh shares from the market.
From net sales of Rs 490 crores and net profit of Rs 66 crores in 2007-08, the company has grown to net sales of Rs 696 crore and net profit of Rs 133 crores in 2011-12. Although sales and earnings have been stagnating in the last two years, the company continues to grow at a steady clip.
As on March 31, 2012 the company’s reserves amounted to Rs 669.67 crores on a paid-up equity capital of Rs 18.29 crores. The promoter Chandavarkar family continues to hold about 67 per cent stake in the company. At current prices, the market value of their holding is worth about Rs 1154 crores. The promoters can expect a sizable premium for their stake from a potential buyer because its has some well known brands in its product portfolio like ‘Electral’ (oral rehydration salt), ‘Zifi’, ‘Pyrimon’, ‘Zoxan’ and ‘Mycoderm’ among others.
The newspaper report claims “Buyout fund Carlyle had shown interest in buying the company and had even valued it at about Rs 3,800 crore. But it is not known if a transaction will take place with the private equity fund”.
In the last five years, the share price of FDC has hit a high of Rs 117.50 and a low of Rs 75 on BSE. You can’t write off the ET report completely because circumstantial evidence point to a likely acquisition or merger with a bigger multinational company if the Chandavarkar family can work out a good bargain. All said and done, FDC is a good buy for bargain hunters!