Tide Water Oil is a lubricant maker promoted by Andrew Yule, a PSU. The company has been in business since 1928. It recently bagged rights to ‘Veedol’ trademark from BP to market it across the world. During FY07-12, though the sales have only doubled to Rs 800 cr, the EPS has jumped 7 times to Rs 697.
Standard Greases and Specialities Pvt Ltd., country’s biggest manufacturer of industrial and automotive greases, has accumulated its shares and now holds 23.24 per cent stake in the company; just 1.76 per cent short of trigerring an open offer of 20 per cent.
It’s a clean debt-free balance sheet with a cash balance of Rs 31 cr and a negative working capital. Valuations look compelling if one compares with peers like Castrol. Even if one discounts for state ownership and lack of liquidity, an earnings multiple of 8.5 against industry average of 19.7 makes it a good bargain.
The talks of Andrew Yule divesting its entire stake of 26 per cent in the company have once again surfaced. As and when that materialises, the obvious contender seems to be Standard Greases for aforementioned reasons.
Post acquisition of worldwide rights to Veedol brand, exports could be a significant growth driver. Tide Water is clearly a backdoor play on industriliasation and ever-increasing demand for automobiles in India.