Waterbase - Can it be next Avanti Feeds?

Waterbase (promoted by Vikram Thapar group, but post family split, it is now part of Karamchand Thapar group) board approved yesterday the scheme of merger with Pinnae Feeds ltd which was part of Karamchand Thapar Group. The scheme approved in my view is favorable to waterbase shareholders.

1. Waterbase capacity goes up 3 times.
2. Waterbase Equity capital goes up from 38.6 Cr to 40.95 Cr. This will not significantly dilute the EPS of the merged entity.
3. Pinnae Feeds was set up with a Debt : Equity ratio of 3 : 1, which means, Waterbase will add debt of ~30 Crores. In 2015, Waterbase was debt free and had a net profit of 19 crores. With expanded capacity, its Turnover and profits will significantly rise and Pinnae debt can be cleared in 12 - 18 months.
4. Waterbase is currently into Shrimp feed processing and will get ready access to Pinnae’s Shrimp feed and Shrimp Hatchery which will be value add to its current portfolio.
5. Waterbase is an established brand, so the expanded capacity can be utilized 100% as the demand for processed shrimps and Shrimp feeds is expected to rise further.
6. Current exports of both Shrimp feeds and processed shrimps are on the rise and the stock should see better days ahead………

Merger Scheme -->> https://corporates.bseindia.com/xml-data/corpfiling/AttachLive/721C0932_3EE3_4FC4_8D92_EAD3235F1900_182010.pdf
Corporate Presentation --> https://corporates.bseindia.com/xml-data/corpfiling/AttachHis/520F9543_5D4C_4182_8C5E_09AEAE53EB81_153107.pdf
Comparison with peers --> https://www.bseindia.com/stock-share-price/stockreach_peergroup.aspx?scripcode=523660&expandable=9
Based on FY15 results, Waterbase has better OPM and NPM (on relatively smaller base) as compared with Avanti, however its Equity capital is 4X that of Avanti and hence EPS takes a hit.

Post merger, waterbase's revenue will be ~50% of Avanti (June 15, Avanti has turnover of 600 Cr, whereas Waterbas has 100 Cr. If capacity goes 3X, revenue will be 300 Cr assuming they are able to operate at 100% capacity). Even if their current OPM and NPM drops a bit on the expanded capacity, there will be significant room for the share rise from the current levels.

Any thoughts on this one?

Disc : I am invested and hence my views may be biased......