SKF India Ltd – Delisting – Case Study

Part 3

For the purposes of this part, please consider today is 19th May,2005.

Why Did We Reevaluate: On 23 march , 2005 , the floor price (153/-) was fixed and Reverse book building dates were announced- 23 may 2005 to 27 may 2005. By 20th May, 2005 we had to decide whether we will participate in the tendering process or not.

Source:Bse Corporate Announcements

Price: price did not react much as it revolved around 210 levels.

Source: in.tradingview.com

Decision: At this point one has two options:

EITHER

one can participate in the reverse book building process ie on 23 -27 may 2005 in which there are two risk:

A) of high exit price being rejected

B) not enough shares being tendered

Both of which will result in termination of the delisting process finally resulting in loss of around 20-25% on capital

OR

square the position at 210 levels which still beat cash equivalent return and gave
10 percent pre tax in the period of approx 3 months.

Conclusion:

We may have exited the position today or during the next day. However, you may have done differently.

Case studies like these help us to practice real life situations, there are many other questions which need to be answered here like allocation (how much), etc. You may use it using your own thinking mode

What Happened? The tendering process failed and the price reached around 180 levels (Though not around 150 as used by our thinking model)

Source: BSE Corporate Announcements

May we all learn together.

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