🧵🧵🧵THE CHICKENS HAVE COME HOME TO ROOST🧵🧵🧵
The fact that chickens usually come home to rest and sleep has long been known, but the idea was used figuratively only in 1809, when Robert Southey wrote, “Curses are like young chickens, they always come home to roost”.
Debt-laden Shapoorji Pallonji group is exiting/divesting one after other good business to save itself from default. The group is now, about to separate its Hygiene product and water purifier maker Eureka Forbes Limited.
The Structure:
The transaction:
🔎Merger of ATPL & EFFSL with EFL
🔎Merger of EFL with holding company FCL
🔎Finally, demerger of EFL business with it's listing
Demerger transaction will be 15 equity shares of ₹10 each of Eureka Forbes (FESL) against 1 equity share of ₹10 each of FCL. It means paid up capital of newly listed company will be 15x (₹ 193.5 crore) of the current paid up capital of FCL i.e., ₹ 12.9 crore.
While Aquaguard being a household name, health & hygiene business generates > 80% of the revenue, margins are absurdly low, compared to other industry players :
Kent RO Systems has been consistently posting EBITDA margins north of 20%
It's evident that imprudent monetary management has destroyed a brand which has substantial value. Now, US PE firm Advent International which oversees assets worth $75 billion is buying Eureka Forbes valuing it at 4400 Cr.
Eureka Forbes, sold for 4400 Cr, will give some breathing space to SP group which is facing crisis to raise funds and is forced to sell its crown jewels, but for investors, this is an opportunity, the mother of all special situations: Demerger + Promoter change
Despite recent sharp rise in prices, Forbes & Co still trades at 2.6X sales. Arrival of new promoters in Advent may cause a perception rerating.
End of the thread.
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