Mercator Lines (Singapore) Pte, the wholly-owned subsidiary of Mercator Lines, the fastest growing Indian shipping company, will soon get bigger than its parent.
The overseas arm, which is on the cusp of getting listed on the Singapore Stock Exchange, is set to surpass its parent in terms of market capitalisation.
Market cap is measured by multiplying the share price with the number of shares outstanding of a public company. In a way, market cap represents the public opinion of a company’s worth and thus, becomes a determining factor in stock valuation. At current share price, Mercator Lines market cap is about Rs 1,200 crore. And now, its Singapore arm IPO involving offloading of 30% stake to raise about $200 million will automatically more than double the valuation of the overseas arm.
“Historically, shipping in India has been considered a cyclical business and this perception gets reflected in the share prices of the shipping companies. Against this, global shipping companies are viewed by investors as integral part of logistics and hence, this (perception) gets translated in the companies’ share prices,” said Sandeep Shah, head, equity sales at Tower Capital.
Mercator will be the first Indian shipping company to encash the better perception of shipping companies abroad. Incidently, Mercator’s Singapore IPO may also be largest by an Indian company.
Set up in late 2005, the Singapore arm has seven bulk carriers as against the parent that has a fleet of 10 tankers, one bulk carrier and two dredgers.
Industry analysts say that shipping company shares overseas get traded at 9-10 times Price to Earning (PE) ratio. In India, the shipping companies share hardly reach PE multiples of five or six.
Mercator Lines’ PE ratio is 4.8 times of the trailing 12-month earnings per share. No wonder, many companies in other sectors too rush overseas. For instance, Polyplexs Thailand subsidiary and Gujarat NRE Cokes Australian arm have bigger market cap than their parent.
The overseas arm, which is on the cusp of getting listed on the Singapore Stock Exchange, is set to surpass its parent in terms of market capitalisation.
Market cap is measured by multiplying the share price with the number of shares outstanding of a public company. In a way, market cap represents the public opinion of a company’s worth and thus, becomes a determining factor in stock valuation. At current share price, Mercator Lines market cap is about Rs 1,200 crore. And now, its Singapore arm IPO involving offloading of 30% stake to raise about $200 million will automatically more than double the valuation of the overseas arm.
“Historically, shipping in India has been considered a cyclical business and this perception gets reflected in the share prices of the shipping companies. Against this, global shipping companies are viewed by investors as integral part of logistics and hence, this (perception) gets translated in the companies’ share prices,” said Sandeep Shah, head, equity sales at Tower Capital.
Mercator will be the first Indian shipping company to encash the better perception of shipping companies abroad. Incidently, Mercator’s Singapore IPO may also be largest by an Indian company.
Set up in late 2005, the Singapore arm has seven bulk carriers as against the parent that has a fleet of 10 tankers, one bulk carrier and two dredgers.
Industry analysts say that shipping company shares overseas get traded at 9-10 times Price to Earning (PE) ratio. In India, the shipping companies share hardly reach PE multiples of five or six.
Mercator Lines’ PE ratio is 4.8 times of the trailing 12-month earnings per share. No wonder, many companies in other sectors too rush overseas. For instance, Polyplexs Thailand subsidiary and Gujarat NRE Cokes Australian arm have bigger market cap than their parent.