Rydak and Dhelakhat Merger: A Great Opportunity for Investors

06 June 2024

Rydak Syndicate Limited and Dhelakhat Tea Limited are planning to merge, which is expected to benefit their shareholders significantly. In the last financial year (FY23), Dhelakhat saw an increase of ~27% in revenue and a significant increase in PAT due to higher tea prices and extra income from other sources. This financial success allowed the company to increase employee bonuses from 8.3% to 20%, on account of positive cashflows.

Currently, Dhelakhat's stock is priced at Rs. 77 per share, with a price-to-earnings (P/E) ratio of 1.6x, indicating it might be undervalued compared to the industry average P/E ratio of 9.0x. The stock's true value is estimated to be within the range of Rs. 300 to Rs. 325 per share, showing a lot of growth potential. Over the past 5 years, Dhelakhat’s revenue has grown at an impressive rate of 13.8% per year, much higher than the industry average of 6.6%.

The merger is expected to add even more value. Dhelakhat shareholders will get 325 shares of Rydak for every 1,000 shares they own. With Rydak’s current share price at Rs. 605, this means each Dhelakhat share price would effectively be worth about Rs. 196 after the merger, much higher than the current price of Rs. 77.

This merger not only provides financial benefits for shareholders but also creates a stronger, more competitive company. Together, Rydak and Dhelakhat will be better positioned for growth and profitability in the future.