That is where merger will help. Rane Brakes is generating lot of cash and is not able to invest as brake lining does not need investment. Where as Rane Madras has debt and lots of opportunities for investments as it enhances product portfolio and explores export market.
Also, recent performance has been impacted by loss making US subsidiary which they have divested. So starting on clean slate.
Note: There is 4% arbitrage when buying Rane Brakes based on merger ratio. Also, Rane Brakes div yield is 3% if they payout this year(management may choose otherwise pending merger). So total arbitrage can be 7%.
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