Is Deepak Fert's hostile bid for MCF justified @ Rs93/sh?

Hem Securities does not see any upward revision for Mangalore Chemicals hereon.

Mangalore Chemicals and Fertiliser (MCF) surged in trade today as Deepak Fertilisers revised its open offer by 48 percent, making its open offer price Rs 93.60 a share. Vineeta Mahnot, EQ Research Analyst at Hem Securities feels the premium justifies Deepak Fertilisers' hostile takeover bid.

Zuari Group firms, in association with Vijay Mallya's UB Group is racing against Deepak Fertilisers for MCF. At present, UB Group owns 22 percent of Mangalore Chemicals.

Hem Securities does not see any upward revision for Mangalore Chemicals hereon, she says in an interview with CNBC-TV18's Nigel D'Souza and Reema Tendulkar.

Below is the verbatim transcript of the interview:

Q: Could you tell us is this premium justified?

A: The premium is justified looking at the Mangalore Chemicals valuation as of now. The stock is scoring at above 15 multiple and the company has EPS of Rs 6.18. The company has a good manufacturing capacity along with good urea production. So, I would say the price of Rs 93 is justified for a hostile takeover by Deepak fertilisers.

Q: What will this do to Deepak Fertilisers financial? Let us assume that the deal closes this year so in FY16 what will the revenues of Deepak Fertilisers as well as the EPS look like?

A: For FY16, Deepak Fertilisers revenues would be around Rs 4500 crore and translating into a PAT of about Rs 260 crore.

Q: Do you see any further revision in this, you were saying that Rs 6 is the EPS you are estimating and 15 times is what the price has come in at. Do you see another upward revision; do you think it will be worth it?

A: I don't find any upward revision for the Mangalore Chemicals. Hostile bid takeover by Deepak Fertilisers Rs 93 is justified.

Mangalore Chem stock price

On September 26, 2014, at 12:29 hrs Mangalore Chemicals and Fertilisers was quoting at Rs 88.10, up Rs 14.65, or 19.95 percent. The 52-week high of the share was Rs 88.10 and the 52-week low was Rs 48.25.

The company's trailing 12-month (TTM) EPS was at Rs 6.18 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 14.26. The latest book value of the company is Rs 53.65 per share. At current value, the price-to-book value of the company is 1.64.