will acquire 54 per cent of the global business of Pfaudler International under the announced deal. The Patel family, which is part of the promoter group, will acquire another 26 per cent stake. The offer for sale which triggered the slide was part of the restructuring. The Patel family and Pfaudler Inc are part of the promoter group at GMM Pfaudler.
Analysts believe valuations are likely to be affected by the governance issues surrounding the fall.
The business remains a strong franchise with good prospects, according to Deven Choksey, managing director of KRChoksey Investment Managers. Steps should be taken to correct any mistakes on corporate governance, he said.
The management said in the conference call on Friday synergies including India’s low labour cost would act as tailwinds for the company. An investor presentation pointed out that the chemical and pharmaceutical segments to which the company caters are doing well.
The pharmaceutical industry is expected to benefit from reduced dependency on China and other drivers like Indian companies
moving up the value chain. The chemicals segment is also supported by stricter environmental regulations in China which acts as a positive for manufacturing in India.
They have mentioned a combined revenue of around Rs 2,000 crore for the 2020-21 financial year (FY21). The earnings before interest, tax, depreciation and amortisation (EBITDA) margin is expected to be 13 per cent. The consolidated revenue is expected to rise to Rs 2,800 crore and EBITDA margins to 16 per cent by FY24. Synergies could further expand these margins, according to the company.
The head of research at a domestic brokerage said that the outlook for the sector is bright. Price discovery has remained a challenge in smaller companies, which may have played out in GMM Pfaudler. He declined to be named, citing compliance issues.