Kurl-On Enterprise Shareholders:

Recently, shareholders were notified via email about a buyback offer for the remaining 5.34% of KEL shares at INR 588.20 per share, which matches the rate at which Sheela Foam acquired its stake. It's important to note, however, that last year KEL's acquisition of stakes from Motilal Oswal PE Fund valued the company at approximately INR 3200 crore, or INR 870 per share. Given this context, the current buyback offer at INR 588.20 per share raises significant questions about the fairness of the valuation, potentially suggesting an undervaluation by the management.

Should Investors Participate in the Buyback?

- Hold: If investors have the holding capacity, it might be advantageous to hold the shares. The rationale behind this is that Sheela Foam’s acquisition could potentially boost Kurl-On Enterprise's operational efficiency, thereby potentially increasing revenue and net profit. This, in turn, could enhance the company’s future valuation.

- Sell: For those facing liquidity issues, participating in the buyback could be a feasible option. Howver, the offer comes at a discount to last year value.

For those who decide to sell, the process involves sending a request letter to the company via email.

Kurl-ON Limited Shareholders:

Having sold its 94.66% stake in Kurl-On Enterprise for INR 2035 Cr, Kurl-ON Limited now faces the significant question of how to allocate this capital.

What Are the Expectations?

- Capital Allocation: Shareholders would be keen to know if this capital will be used for debt repayment, strategic investments, or possibly returned to shareholders in some form.

- Dividend or Share Buybacks: A special dividend or a share buyback program could be an immediate way to benefit shareholders.

- Strategic Focus: With the major stake now sold, what will be the company’s new strategic direction? Will it diversify or double down on existing operations?

Hypothetical Special Dividend Scenario:

If we assume that Kurl-ON Limited decides to distribute the entire INR 2035 Cr as a special dividend, we can calculate the per-share dividend. Given that Kurl-ON Limited has 1.488 Cr total outstanding shares, the special dividend would amount to approximately INR 1367 per share.

However, Before we give the above fair value to Kurlon Ltd share out of sale proceeds we have to keep in mind the following,

1. Recently, KL acquired a 10.06% stake in KEL, purchasing it from Motilal PE Fund for a consideration of INR 325 crore. Notably, KL did not have sufficient liquid funds on its books to complete the transaction, indicating that the capital was likely borrowed. At the time of this acquisition, Motilal PE Fund's valuation for KEL stood at approximately INR 3200 crore.

2. And, when KL has purchased the KEL shares the book value was around INR 40 Cr and today the value is INR 2035 Cr. So, they need to pay LTCG. Overall, we can say 30-35% from INR 2035 Cr will go for Debt repayment and Taxes. So, per share value would be INR 880-900 per share.

In summary, the next moves from the management will be critical and highly anticipated by Kurl-ON Limited shareholders. It remains a compelling situation worth monitoring closely.