INSUBCONTINENT EXCLUSIVE:
price offer an opportunity for investors.
The stock of the Sanjiv Goenka owned company has corrected near 20 per cent in the past two months
and is now trading at a price below that when the demerger was announced last year
separately listed business process outsourcing company Firstsource, will form the fourth entity.
Since the demerger announcement last year
in May, the retail sector has seen a strong turnaround resulting in shares of its listed peers such as Future Retail, V-Mart Retail and
Avenue Supermart grow multifold.
Spencer, the retail arm of CESC, also turned profitable at the operating level on revenue of Rs 2,100 crore
Food category was at 80 per cent of the total revenue, similar to DMart
Its peers are trading at 2 to 8 times of sales: Assigning a one- time value to Spencer would fetch it Rs 160 per share.
Shares of
Firstsource, in which, CESC holds 54.5 per cent, have more than doubled in the last one year
At 40 per cent holding discount the value per share for holding Firstsource comes to Rs 115.
The biggest unlocking would be of the power
distribution business (distribution business in Kolkata and adjoining areas and three Rajasthan cities), which generates nearly 20 per cent
return on equity and would be the only listed distribution company
This could attract investor interest.
Analysts are assigning 2.8 to 3 times book value to this business and thus arriving at a price of Rs
The company also has a power generation business which at 1.5 times price-to-book can be valued at Rs 400.
Based on the sum of part
valuation, total value of the four businesses comes to Rs 1,325 per share
At this price, the stock is trading at one time price to book value and analysts expect it to touch 1.3 to 1.4 times close to the
demerger.
With the company receiving the final demerger approval from NCLT in March, analysts tracking the company closely expect the split
to happen in August-September.
