Phoenix Lamps’ Board Okays Merger with Par­ent Supra­jit

Get 4 shares of Supra­jit for ev­ery 5 shares held in Phoenix

The Economic Times - - Companies -

ET In­tel­li­gence Group: The­board of Phoenix Lamps, which was ac­quired by Supra­jit Engi­neer­ing last year, has ap­proved its amal­ga­mat i o n wit h p a re nt Supraji t . Ac­cord­ing to the deal, for ev­ery 5 shares held of Phoenix, in­vestors will get 4 shares of Supra­jit, Phoenix Lamps said in an an­nounce­ment.

The amal­ga­ma­tion will be a step for­ward in in­te­grat­ing the busi­nesses of the two com­pa­nies, the ben­e­fits of which are be­ing re­flected in the num­bers since the De­cem­ber quar­ter.

The Ben­galuru-based Supra­jit Engi­neer­ing is pri­mar­ily in­volved in the busi­ness of au­to­mo­tive ca­bles and wires, and 81% of its sales come from do­mes­tic mar­ket. Phoenix, which is into au­to­mo­tive lamps, de­rives 47% of its sales from over­seas. “Given Phoenix’s strong trac­tion in ex­port mar­kets, it should help Supra­jit pen­e­trate newer mar­kets and clients,” said Dhru­vesh Sanghvi of Pros­pero Fin­vest, an ad­vi­sory firm.

For this rea­son and to widen its of­fer­ings to the OEM cus­tomers, Supra­jit ac­quired Phoenix last year from Ac­tis pri­vate equity. Phoenix has over 55% mar­ket share in au­to­mo­tive lamps in In­dia, and has 3 plants in In­dia, Ger­many and Lux­em­bourg, re­spec­tively.

Along­with­the­new­er­mar­kets,the merger and a bet­ter prod­uct port­fo­lio will also ben­e­fit both com­pa­nies to have a bet­ter pric­ing power with the OEMs. Both the com­pa­nies sell di­rectly to the OEMs and also have an af­ter sales mar­ket.

Althoughthenum­ber­sof Supra­jit can­not be com­pared on year-onyear ba­sis as FY16 num­bers also in­clude Phoenix’s num­bers, on a quar­ter-on-quar­ter ba­sis, there is a con­sis­tent im­prove­ment in terms of net profit for the last two quar­ters.

Net profit growth for the De­cem­ber quar­ter, for i nstance, was 28% higher than that of Se ptem­ber, and Septem­ber net profit was 42% higher than that of June’s. On Mon­day, Supra­jit’s stock closed 7.3% higher, while the stock of Phoenix Lamps closed 1.6% lower. Supra­jit’s shares are trad­ing at 18 times FY16 earn­ings which ap­pears fair. Given that for 5 shares of Phoenix will get 4 shares of Supra­jit and the clos­ing prices of the shares of both the com­pa­nies, in­vestors should pre­fer Phoenix shares over Supra­jit’s.

On Mon­day, Supra­jit’s stock closed 7.3% higher, while Phoenix Lamps closed 1.6% lower

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