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Pearl Engg. looks for suitors, Reliance in fray - Views on News from Equitymaster
 
 
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  • Oct 5, 1999

    Pearl Engg. looks for suitors, Reliance in fray

    Reliance Industries (RIL) is considering the acquisition of Pearl Engineering, a part of the Pearl Polymer group. The company manufactures bottle grade polyester in India. Indo Rama (Thailand) is also considered to be in the fray.

    Reliance Industries (FY99 Sales Rs 14.5 bn) is India's largest private sector company. Its activities encompass polyester, fiber intermediaries, polymers, chemicals and branded textiles. The new ventures are in the core sectors of oil and gas, power and telecom.

    A successful bid by Reliance will give it dominance in the bottle grade polyester market in India. Moreover, as Pearl Engineering is an ailing company, Reliance may be able to get a good bargain. Pearl Engineering will benefit from the technological, financial and marketing strengths of the Reliance group.

    However, as the Indo Rama (Thailand) group is also likely to bid for the company, there is a possibility that the price may be bid up, in which case the overall returns from the acquisition may be lower than expected.

    Market View:
    Analysts have rated the stock as a 'BUY'. The reasons in favor of the 'BUY' recommendation are firstly, the upturn in the petrochemicals cycle, following the recovery in S E Asia, and secondly, the fact that the company, having completed its capex plans, is likely to generate cash this year.

     

     

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