ROHIT FERRO TECH LTD: BUY

CMP: Rs.8.05

Rohit Ferro-Tech, which is into ferro alloy manufacturing, has units located at Bishnupur and Haldia in West Bengal, apart from the Jajpur plant in Odisha (Orissa).

The company has been facing several problems like non-availability of adequate quantities of raw materials, lower capacity utilisation and low absorption of overheads, since a long time. Also, its Jajpur unit has been under severe financial stress owing to its high debt exposure. Considering the prevalent unfavorable business environment and no sign of improvement in short term, the company decided to dispose of the Jajpur unit; so as to ease its financial burden and improve its cash flow requirement.

Balasore Alloys Ltd (formerly Ispat Alloys Limited), which is part of the Ispat Group, inked the deal to acquire Rohit Ferro-Tech's Jajpur-based manufacturing unit for an enterprise value of $164.5 million (approximately Rs.1,025 crore). This will substantially reduce the debt on the books. 

The company last month announced to offer and allot, subject to the approval of the shareholders, 7,12,05,000 (Seven Crores Twelve Lacs Five Thousand) Convertible Warrants of nominal value of Rs.10 each at a price of Rs.20 per Warrant (including a premium of Rs.10 per Warrant) in accordance with SEBI (ICDR) Regulations, 2009, to the entities belonging to the promoter group and strategic investors belonging to non-promoter group on preferential basis.

The investors are suggested to buy the shares of Rohit Ferro Tech Ltd at around Rs.8.05, for a medium term target of Rs.14-17. Kindly, consider this as your Fixed Deposit and keep holding.