Welspun Enterprises gains after board approves divesting stake in Welspun Energy

capital market | Mumbai | December 26, 2016 11:13 IST

Welspun Enterprises rose 3.87% to Rs 61.80 at 11:21 IST on BSE after the company said its board approved selling its entire 15.49% stake in Welspun Energy.

The announcement was made on Saturday, 24 December 2016.

Meanwhile, the BSE Sensex was down 230.23 points, or 0.88%, to 25,810.47.

On the BSE, so far 2.33 lakh shares were traded in the counter, compared with average daily volumes of 1.23 lakh shares in the past one quarter. The stock had hit a high of Rs 63.40 and a low of Rs 60.30 so far during the day.

The stock hit a 52-week high of Rs 75.30 on 3 November 2016. The stock hit a 52-week low of Rs 43 on 12 February 2016. The stock had outperformed the market over the past 30 days till 23 December 2016, rising 3.03% compared with the 0.70% rise in the Sensex. The scrip had also underperformed the market in past one quarter, falling 7.47% as against Sensex's 9.17% decline.

The small-cap company has equity capital of Rs 174.28 crore. Face value per share is Rs 10.

Welspun Enterprises (WEL) announced that the board of directors of the company has approved sale of its entire investment of 6.04 crore equity shares, representing 15.49% stake, in the paid up equity share capital of Welspun Energy.

Post sale of its renewable business, WEL's 15.49% minority stake in Welspun Energy does not contribute to the consolidated results of the company. In order to unlock value for the company, the board of WEL authorised the monetization of this stake, subject to shareholders' approval.

As against its investment of Rs 91.10 crore, the stake is proposed to be sold to Welshop Trading, for a consideration of approximately Rs 290 crore plus contingent consideration, thereby implying more than three times returns to the company on its investment.

In addition to buying out WEL's stake, Welshop Trading, part of Welspun Group, has agreed to buy out the stake of other shareholders in Welspun Energy at equivalent consideration.

Last week, Welspun Enterprises announced that it plans to buyback up to 25% of its share capital at Rs 62 per share. With a view of utilising the company's substantial cash reserves and in order to enhance shareholder value, the company's board approved buy back of 25% of the company's share capital. The buyback would be at Rs 62 per share in cash for an aggregate consideration not exceeding Rs 270 crore. The promoter group, except the foreign co-promoters holding 2.17%, have indicated their intention to participate in the proposed buyback. The announcement was made after market hours on Thursday, 22 December 2016.

Net profit of Welspun Enterprises rose 116.67% to Rs 2.86 crore on 16.9% rise in net sales to Rs 33.22 crore in Q2 September 2016 over Q2 September 2015.

Welspun Enterprises (WEL), formerly Welspun Projects, part of the Welspun Group, is an operating the company in the infrastructure business. The company also has investments in oil & gas exploration. The company, in its current form was created through the merger of Welspun Enterprises, Welspun Infratech, Welspun Plastics and Welspun Infra Projects with Welspun Projects through the scheme of amalgamation and arrangement made effective from 11 May 2015.

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