MUMBAI, February 12: The news of the amalgamation between Hindustan Lever and Ponds broke the drought on the local bourses. Local bulls driven by sentiment and rumours of the likely swap ratio rushed to make a killing."Ponds will leverage on the synergies of the distribution network and product profile. The news has given a new lease of life for those who have held Ponds on their books," commented a fund manager at a domestic brokerage house.This has been attributed as the main reason for the sudden buying interests at the Ponds counter, which recorded a sharp rise of 6.65 per cent to touch an intra-day high of Rs 1,025. The counter registered a huge volume of 2.82 lakh shares. According to market participants, 50 per cent of the volume at the Ponds counter was seen during the last 30 minutes of trading.Market players continued to speculate on the swap ratio, which varied between 2:3 (three shares of Ponds for every two shares of HLL) to an extreme state of 8:10.However, analysts on the basis ofvarious evaluations felt that a 2:3 ratio was a more likely one."Given the fact that the turnover by equity ratio of HLL stands at Rs 38 and that of Ponds is Rs 22, the swap ratio of 2:3 is advisable," commented a research analyst.The EPS figures of HLL (Rs 30) and Ponds (Rs 20) also justifies the above mentioned ratio. However, on the basis of the book value of the stock, marketmen continued to maintain that the company could consider a swap ratio of 4:5. (4 HLL:5 Ponds).According to market sources, Jardine Fleming Brokerage house was rumoured to have sold about 1.5 lakh shares of HLL at the day's high of Rs 1,394.70. This could, however, not be confirmed.The market continued to maintain that the amalgamation is more attractive for the Ponds shareholders than HLL, which continued to reflect on the price of the stocks.Rumours that local institutions like UTI offshore fund and LIC Mutual Fund placed buy orders at the counter of Ponds also helped prop up sentiments.Mirroring the hectic activityat the two counters, the volumes of HLL touched a new high of 8.55 lakh shares on the NSE. However, the stock marginally inched up to close at Rs 1,380 on the NSE and Rs 1,382 on the BSE, a net gain of less than 1 per cent.The news of the acquisition of 50 per cent in the Lakme-Lever combination saw the Lakme stock jump by over 10 per cent. On the NSE, the stock was locked at the intra-day's high of Rs 289.50. It, however, closed slightly lower at Rs 280.25.
