Phoenix Lamps’ Board Okays Merger with Parent Suprajit
Get 4 shares of Suprajit for every 5 shares held in Phoenix
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