Special situation Strategy in equity market

Special situation Strategy in equity market


An event driven strategy of investment is the one that helps an individual investors to identify stocks that may lead to a successful long-term investment. The common terminology used for such technique is called “Special Situation” strategy. Management of the firm may take some corporate actions that will change the fundamental value of the company. Intelligent decisions of such managers could result in uplift of the intrinsic value of the underlying business. As a special situation strategist in equity market, investors should look in for such announcement on regular basis. Here are some of such situations that can be worth following-


De-merger – when businesses are managed individually, it might earn more return than in combined way! In developed markets, they call this as ‘spin-off’
Divestiture of non-core business segment or an asset – this will hive off the loss or low performance. It is better to remove bad apples from the good ones
Buyback, Special dividend or Return of capital – Companies that reduces its ownership ambit or its own capital when their underlying business is growing consistently
Insider buying – When managers of business increases their ownership in it, there may be a change in the fundamental value of the company
Debt pay down – Debt free capital structure is too good for a business. When firm pays down its debt, it can be a good sign for investors



The above list is exhaustive. Investors can also include arbitrage opportunities in M&A if both the entities are public.


Let us check out some of the special situation stocks announced in BSE.


Company Announcement Special Situation
Kriti Industries India Ltd Kriti Industries India Ltd has informed BSE that the Company has received certified true copy of the order of Hon'ble High Court of Madhya Pradesh on January 08, 2010, for approving the Scheme of Arrangement between Kriti Industries (India) Ltd., Kriti Nutrients Ltd. and Kriti Auto & Engineering Plastics Pvt. Ltd. for demerger of solvent division into Kriti Nutrients Ltd. and hiving-off moulding division into Kriti Auto & Engineering Plastics Pvt. Ltd. The appointed date for the same has been fixed as January 01, 2010. Both de-merger and divestiture




FDC Ltd Got shareholders approval for buyback - to commence buyback from Jan 18, 2010. The Company proposes to Buyback upto 86,50,000 Shares ("Maximum Offer Shares") and minimum of 13,00,000 Shares ("Minimum Offer Shares") at a price not exceeding Rs. 65/- per share payable in Cash. Buy back