TTK Healthcare proposes delisting, 2 weeks after Sunil Singhania’s stake purchase

Currently, promoters hold 75 percent in the company and public shareholders hold 25 percent

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TTK Healthcare on April 5 proposed delisting its shares, just two weeks after Sunil Singhania’s Abakkus Fund acquired a 1.74 percent stake in the company. TTK’s Board will be meeting on April 20 to consider and approve or reject the proposal.

The company exited its human pharma business last year and is now left with consumer product lines like women’s deodorant Eva, home care brand Good Home and Skore condoms that earn a single-digit margin and operate in a highly competitive environment. This is one of the main reasons management has decided to delist the company.

Over the past few quarters, the company’s operating margins have ranged between 4-9 percent.

The promoters also perceive that any long-term business plan would involve rationalization of some, expanding into new categories and new businesses, which may have different risk profiles and funding requirements.

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“It wouldn’t be fair to subject public shareholders to all these uncertainties, and thus provide them an exit opportunity through a delisting offer,” the company said in an exchange filing.

Last year, the company sold its human pharma division to Mumbai-based Bharat Serums and Vaccines (BSV) for Rs 805 crore. Seventy four percent of the sale consideration was by way of cash, which amounts to about Rs 600 crore. The company had planned to use the cash proceeds in areas of “core competency and for the benefit of all stakeholders”.

At 9:20 am, the stock was trading at Rs 1,379 on the NSE, higher by 9.5 percent from the previous close. It has a market capitalisation of about Rs 2,000 crore.

“In anticipation of higher delisting price, the stock has run up in recent times and is trading at rich valuations. The delisting process is long and hence, one can tactically think of playing the rally rather than waiting for final delisting price,” said Awanish Chandra, executive director, SMIFS which is a research-based financial services firm.

India’s delisting process through a reverse book building process is the fairest when compared globally, said Hetal Dalal of Institutional Investor Advisory Services (IIAS). It allows a market mechanism to determine the delisting price.

“It is not unusual for the stock price to ratchet up after delisting announcement. If shareholders do not want the company to delist, they can vote against the shareholder proposal,” she said.

We saw this recently in the case of DFM Foods delisting, when shareholders rejected the first offer.

TTK Healthcare stock has run up over 40 percent since Sunil Singhania’s stake buy in the company. While the floor price of the delisting offer will be decided on the basis of last 26 weeks’ traded price, there is no limit on the ceiling price as per Securities and Exchange Board of India (Sebi) regulations.

Currently, promoters hold 75 percent of the company and public shareholders 25 percent. As of February data, Axis Mutual Fund held a 2.08 percent stake and ITI Mutual Fund held 0.08 percent.

The delisting process will be successful if shares are accepted through eligible bids at the discovered price, that takes the shareholding of promoters to 90 percent.

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