Yokogawa Blue Star is witnessing immense activity on developments related to buy out of the Indian partner's stake by the Japanese partner and a subsequent open offer.

As a result, the scrip of Yokogawa Blue Star soared 18.7% to Rs 64.75 on BSE in early trades on Monday.

The foreign promoter, Yokogawa Electric Corporation, has made an open offer to buy out the entire remaining stake of 31.45% in Yokogawa Blue Star at a price of Rs 67 per share, a substantial premium to the market price. The open offer was announced on Saturday. The price comes at a premium of 22.8% to Friday's closing of the scrip of Rs 54.55.

In fact, YBSL was trading firm on the bourses of late on talk that Yokogawa Electric Corporation, Japan was planning to buy out the Indian partner Blue Star's entire stake of 28.55%. YBSL's scrip surged by its maximum permissible level of 20% on 21 March 2003 when Blue Star informed stock exchanges that it was considering offloading its equity stake in favour of its Japanese counterpart. The stock continued to move north ahead of Blue Star's announcement, on 27 March 2003, that it has approved the sale of its stake in favour of the Japanese counterpart at Rs 67 per share.

With the announcement of the open offer, the stock rocketed on Monday. YBSL has said that the open offer would involve buying out the entire remaining stake of 31.45%. Yokogawa Electric Corporation, Japan currently has a 40% stake in YBSL and, following the acquisition of Blue Star's 28.55% stake, the Japanese's company's stake would go up to 68.55%.

YBSL has cited section 11 (1) of Sebi Take Over Regulations which pertains to consolidation of holdings, for the proposed open offer. It has further said that with de-regulation YBSL's business has become highly competitive and it requires large investments which could lead to lower returns and loss in shareholder value.

YBSL manufactures and markets distributed process control systems and instruments. The company has four business units - systems, products, services and solutions. The company has been enjoying a market share of around 35% in the systems segment over the past couple of years. In the products segment, the share is in excess of 40%. The company has a market share of 25% in transmitters. In solutions, the share is around 5-10% and the target is to add around Rs 20 crore to the top line in this segment.

The company is also planning on exports of engineering services for DCS to the Yokogawa group of companies. This segment has registered a growth of 30-40% compared to the previous fiscal.

The continued slowdown in the capital goods sector took its toll on YBSL's top line, which fell by 7% to Rs 132.91 crore in the financial year ended 31 March 2002. The main reason for the loss was the business mix - the lower proportion of services, both domestic as well as exports, to the Yokogawa group of companies. In addition, there were sustained losses in the IT business in the US. The IT business registered losses in FY 2000-01 and FY 2001-02. YBSL shut down the IT division early this year. After exiting the IT business, the company is back in the black.

For the first nine months ended 31 December 2002, YBSL's net profit was at Rs 2.34 crore as against a loss of Rs 1.97 crore in the corresponding nine months of the previous year. The operating profit margin has improved to 5.0% as against 1.7%, leading to a 181% growth in operating profit to Rs 4.32 crore.

The company expects to end the current fiscal with a top line of around Rs 140-145 crore, a growth of around 7% - 10%, mainly backed by the performance in the fourth quarter ending 31 March 2003.

The company believes that the medium-term outlook for capital expenditure in the power, refining, metals, pulp and paper and pharma sectors, which looks promising, will enable it to garner adequate business to sustain its growth.