IIFL has recommended an add rating on Bombay Rayon Fashions with target price of Rs 159 in its March 26, 2009 research report.
“BRFL announced preferential allotment of 18m shares at Rs 185/share-32% higher than the current market price-to an investor company, AAA United BV (promoted by European fashion retailer Bestseller). This Rs 3.3 billion equity infusion, which results in 26% equity dilution, addresses two investor concerns: a) it lowers the company’s debt/equity from 1.7x to less than 1.2x; and b) it lends greater visibility on volume growth, given the strategic interest that a large buyer such as Bestseller would have.”
“We revise our FY10 and FY11 PAT estimates upwards by 8% and 13% to account for lower interest costs, but lower our EPS estimates by 14% and 10% to account for the dilution. Accordingly, we also raise our target price to Rs 159 from Rs 135 earlier, as we raise the earnings multiple to account for greater visibility on volume growth,” says IIFL’s research report.
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