Promoters’ Stake Sale in Focus as Route Mobile Shares Plunge 16% from 52-Week High

Promoters’ Stake Sale in Focus as Route Mobile Shares Plunge 16% from 52-Week High

Shares of Route Mobile Ltd experienced a significant decline in Monday’s trading session after reaching their 52-week high level. The stock initially surged to a high price of Rs 1,759.50 during early trade following the announcement that Proximus Group, a telecom service provider based in Belgium, would acquire a majority stake in the company. However, as the session progressed, the stock witnessed a sharp decline of 16.25 percent from its peak and reached a low price of Rs 1,473.60.

The fluctuation in the stock price can be attributed to market dynamics and investor sentiment. The initial surge in response to the news of Proximus Group’s investment in Route Mobile demonstrated positive investor sentiment.

However, as the trading session progressed, factors such as profit-taking or other market influences likely contributed to the subsequent decline in the stock price. Such price fluctuations are not uncommon in the stock market, and they reflect the ebb and flow of investor sentiment and market dynamics throughout a trading session.

As per the exchange filing, Proximus Group has agreed to purchase a 57.56 percent stake in Route Mobile Ltd for a total amount of Rs 5,922.40 crore. The Belgian telecom service provider disclosed that it would acquire the stake for Rs 1,626.40 per share.

The investment by Proximus Group reflects their interest in the cloud communications platform provider, Route Mobile. This strategic acquisition demonstrates Proximus’ commitment to expanding its presence in the telecommunications sector and leveraging the capabilities offered by Route Mobile in the cloud communications space.

Route Mobile Ltd has indicated that the acquisition of a majority stake by Proximus Group would trigger a mandatory takeover offer (MTO) as per Indian regulations. The MTO would require Proximus Group to make an offer to purchase up to 26 percent of the total outstanding shares of Route Mobile at the same price per share.

This complies with the regulatory framework in India, which ensures fair treatment of shareholders in such acquisition scenarios. The MTO provides an opportunity for existing shareholders of Route Mobile to participate in the offer and potentially sell their shares at the stipulated price.

Depending on the response to the mandatory takeover offer (MTO), the stake held by Proximus Group in Route Mobile could potentially increase to approximately 75 percent. The final extent of this increased stake would be determined by the effective take-up of the MTO by existing shareholders.

The cash consideration for the additional stake would be determined based on the response and participation of shareholders in the MTO. This implies that the final cash consideration would depend on the number of shares tendered by shareholders who choose to participate in the offer. The outcome of the MTO will ultimately determine the ultimate ownership structure and control of Route Mobile.

As part of the acquisition and mandatory takeover offer (MTO) process, there will be a subsequent reinvestment of €299.6 million by certain founding shareholders of Route Mobile. This reinvestment will entitle them to acquire up to 14.50 percent of the shares of Proximus, the acquiring company. The reinvestment by the founding shareholders implicitly values Telesign, a subsidiary of Route Mobile, at approximately €1.4 billion.

With the inclusion of this reinvestment, the net cash consideration for Proximus before the MTO is estimated to be approximately €343.4 million. This amount represents the net cash outflow for Proximus after considering the reinvestment by the founding shareholders. The reinvestment and the subsequent valuation provide further insight into the financial aspects and strategic implications of the acquisition and MTO process between Route Mobile and Proximus.

On the Bombay Stock Exchange (BSE), a significant number of shares were traded today, with approximately 1.77 lakh shares changing hands. This volume is considerably higher than the two-week average volume of 16,000 shares, indicating heightened trading activity. The total turnover on the counter amounted to Rs 28.48 crore, contributing to a market capitalization (m-cap) of Rs 9,366.79 crore.

The 14-day relative strength index (RSI) for the company’s stock stood at 40.49. A value below 30 on the RSI is typically considered oversold, while a value above 70 is viewed as overbought. With an RSI of 40.49, the stock is currently not in extreme territory.

In terms of valuation metrics, the company’s stock has a price-to-earnings (P/E) ratio of 112.95, indicating a higher valuation relative to its earnings. The price-to-book (P/B) value is 9.01, suggesting that the stock is valued at a higher multiple relative to its book value. Furthermore, the stock has exhibited relatively low volatility, with a one-year beta of 0.80.

In a contrasting market development, Indian equity benchmarks reached new record highs on the given day. The 30-share BSE Sensex index witnessed a substantial surge of over 350 points, reaching its all-time high of 66,435. Simultaneously, the broader NSE Nifty index climbed nearly 100 points, scaling a record high of 19,674.