EPC INDUSTRIE - BE READY TO REAP

Nowadays I am receiving lot of queries regarding the strategy to be followed on EPC Industrie Ltd ( BSE Code - 523754) . I have recommended this company @ Rs.61/- in last August (Old posting  HERE ) which is currently quoting around Rs.140/- . In my old post ,I clearly mentioned that EPC is a potential takeover target by big players. As expected ,auto major Mahindra and Mahindra ( M & M) took over this company by subscribing 65,58,065 Equity Shares @ Rs.66.10/- . Mandatory open offer for another 20 % is currently going on . On the new equity base of 17 Cr .M&M will hold close to 38 % , two foreign P/E players will hold 32 % ,old promoters will hold 16 % and the general public  will hold 14 % .On completion of the open offer ( nothing is expected to get since market price is above open offer price) , share holding will be re classified so as M& M will be the new promoters and old promoters will be moved to public category. In many of the recent interviews Mahindra's indicated their decision to concentrate in futuristic industries other than Automobile.Takeover of EPC is a bold decision in this direction.The potential of Micro irrigation in India is huge and a major portion is still untapped .As on date there is only one major player in the listed space ,ie,Jain Irrigation.Due to lack of sufficient working capital EPC could not tap the opportunities available even if it an  approved supplier to the Micro irrigation projects initiated by Gujarat and Andhra Pradesh State governments .Last year central government upgraded its micro irrigation  scheme to a national mission with an outlay of Rs 8032.90 Crore .Recent fund infusion by M&M is really a game changer for EPC which currently having a debt burden of around 30 Cr.It is indicated  that the fund raised through preferential issue will be utilized for repayment of debt , working capital requirements, capacity expansion and implementation of new generation drip irrigation technology .Moreover,doing micro irrigation projects on a turnkey basis is the money spinner now and many private parties are demanding such models .Till now EPC lacks the money power and other facilities to execute such projects ,but the situation will change in future. As a coincident , M & M recently de-merged its agri related business division Mahindra Shubhlabh Services Limited.This de-merged entity is handling  M &M's Agri Inputs Business, produces and distributes seed, seed potato ,selling  crop care products and also handling contract farming in large area for  Basmati, Maize, Barley, Cotton, Moong, Soybeans, Durum, Hyola ..etc  and other oilseeds such as Sunflower and Mustard. At this stage there is no chance for a merger of both these companies ,but we can't ruled out an integration of all the agri related businesses under the fold of  the listed EPC Industries in future.


Another point is ,tracking the trading pattern and price movement of EPC Industrie in the past few months ,I strongly feels that huge accumulation is happening in this counter even at a level double to the open offer price by  M & M . In nut shell,In the hands of a management like M & M with large network of agriculture related business( Tractor) , good reputation with money power - EPC Ind having a chance to grow by leaps and bounds especially at a time the parent is seriously thinking beyond their conventional auto business.So one should hold the stock at current level and try to add in small lots if there is any correction below Rs.120/- due to the over all weakness of the market. If everything clicks well and you have patience , EPC Ind may go even beyond your imagination. CMP is Rs.140/-