Sunday, February 3, 2008

Arbritrage opportunity in RPG Trans and KEC

RPG Transmission is getting merged into KEC international.
Swap Ratio is 4 shares of KEC for every 9 shares of RPG Trans.
CMP of KEC is 700 and of RPG is 280.
Going by swap ratio if you buy 9 shares of RPG @ 280 the you'll get 4 shares of KEC and effective price of KEC per share will come to 9*280/4 = 650, that is almost 8 % discount to current market price of KEC. Assuming whole process takes 2 months and KEC price remains stable , you can get neat 8 % return in two months. More over KEC has declared good 3rd quarter results and this stock will remain in demand.

So accumulate RPG Transmission at every opportunity.

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