After Mylan's proposed de-listing of Matrix Labs at an indicative price of upto Rs150 per share has raised market speculation who might be next to delist. The key question that has arisen is: have valuations reached such attractive levels where global companies are looking at mopping up some of their smaller counterparts.

The only potential reason for delisting is the kind of valuations most of the companies are trading on. Recently, consolidation was seen in Matrix-Mylan, Novartis India  and Madras Aluminium Company. Ingersoll Rand (India) is another example where the buyback is there and people say that it could eventually lead to delisting.

Now, there are talks in the market that Ranbaxy  could be a delisting candidate after Daiichi acquired nearly a 64-per cent stake in it at Rs 737 per share, while the prevailing price has come to nearly Rs160. If Daiichi wants to go ahead and the price remains at this level, at one point of time the company will go ahead, and eventually, de-list the company.

Just seeing at the potential what marked them to pay this huge price and a huge premium on this.

Currently Daiichi holds around 64 per cent, 17 per cent is held by institutions and around 18 per cent is held by individuals. What we understand is that the likely trigger point for Daiichi to delist this company is 75 per cent. It will not be difficult for Daiichi to get shares from the market if they give attractive price for some of shareholders because they need only another 10 per cent -11 per cent to go ahead and de-list the company.

Non-institutional shareholders could be ready to offer the shares at a price which could be compelling for the company. The company also has warrants worth around Rs2.4 crore that will be converted in the next one year.

However, warrant conversion price is Rs737 per share and most of the market participants believe that they the company may not convert those warrants.

Interestingly, the only reason why most of these companies wait for a long-time is because the buyback price is determined by the six months average or the two-week price, whichever is higher. So they have to give it a time that the eventual price comes to those lower levels wherein the average of six months is low compared to what they have to pay.

Oracle to delist?
The other delisting  candidate is Oracle, and for long, there has been speculation that there will be another open offer or a de-listing offer from the parent Oracle for I-Flex, which is now called Oracle Financial Services.

Just to run through what has happened with I-Flex over the last some years since Oracle brought a 41-per cent stake from Citigroup, followed by an open offer. In the first open offer, Oracle could manage to raise its stake to only 55 per cent. Since then there have been two open offers –– one at Rs1,475 , which helped raise its stake to 63 per cent. The next open offer was at Rs2,100 per share; enabling it to raise its stake to 80 per cent.

There is a very interesting comment that Oracle had made when it made the last open offer at Rs2,100. It said this this was the last opportunity for all the share holders and that the company was not looking at de-listing I-Flex on the Indian market provided it was not trading at a very deep discount to the price at which the last open offer of Rs 2,100 was made, while the stock is currently quoted at around Rs760 – Rs770.

In the last one month the stock has actually outperformed the IT index, leading to speculation of a delisting. Adding to the market speculating is the fact that Oracle, the parent company, is sitting on a lot of cash.

We are not advocating that there will be an open offer, as this is purely market speculation.