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Hold Essel Propack; target of Rs 136: ICICI Direct

April 24
16:25 2019

ICICI Direct’s research report on Essel Propack

In a recent development, private equity player Blackstone has entered into an agreement with Ashok Goel Trust to purchase ~51% stake in Essel Propack (EPL) for a consideration of Rs 2157 crore (Rs 134/share). Ashok Goel Trust and its affiliates currently hold ~57% of EPL. Further, as per the takeover code, this transaction will trigger a mandatory open offer for a purchase of additional 26% shares of the company. The open offer price has been fixed at ~Rs 139/share. Based on the open offer subscription, the purchase price consideration will vary between Rs 2,157 crore and Rs 3,211 crore (~US$ 310-US$ 462 million). Ashok Goel, Chairman & Managing Director, will retain a minority stake (6%) in EPL.

Outlook

We believe a demand recovery in the Amesa and Europe region will be a key trigger for future growth. With a target market cap, the deal is valued at 20xFY20E, 17xFY21E earnings and 8xFY20E, 7xFY21E EBITDA, respectively. We believe the stock would hover around the deal price.

For all recommendations report, click here

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