Asian Energy Services Ltd. experienced a significant drop in its share price following the announcement of a merger with Oilmax Energy. The company's stock fell over 13% as investors reacted to the news of the board-approved merger by absorption.

Merger Details

The board of Asian Energy Services has given its approval for a merger by absorption with Oilmax Energy. Under the terms of the scheme:

• Oilmax Energy will be dissolved, with all its assets, liabilities, rights, and approvals transferring to Asian Energy Services.
• The existing 66% stake that Oilmax holds in Asian Energy will be cancelled.
• Asian Energy will issue fresh shares to Oilmax shareholders based on a predetermined share-exchange ratio.

Impact on Shareholding

The merger is expected to have a significant impact on the company's shareholding structure:

• Post-merger, the promoter shareholding will decrease from 65.00% to 47.00%.
• This represents a substantial 46.00% equity dilution for existing shareholders.

Financial Projections

The combined entity resulting from the merger is projected to have:

Notably, the Earnings Per Share (EPS) is expected to improve by 17.00%, increasing from ₹8.40 to ₹9.89.

Market Reaction

The market's initial reaction to the merger announcement has been negative:

• Asian Energy Services shares were trading at ₹344.75, representing an 11.00% decline on the day of the announcement.
• The stock has also seen a year-to-date decline of over 9.00%.

Timeline

The merger process is expected to be completed within 12 months, resulting in a single listed entity.

Investors and market analysts will be closely watching the developments of this merger and its potential long-term impact on Asian Energy Services' performance and market position.

Asian Energy Services has reported a robust financial performance for the third quarter of the fiscal year 2019-2020, with significant growth in both revenue and profitability.

Strong Revenue Growth

The company's consolidated revenue from operations soared to ₹8,642.09 lakhs for the quarter ended December 31, 2019, marking a substantial 74% increase from ₹4,977.96 lakhs in the corresponding period of the previous year.

Impressive Profit Surge

Net profit for Q3 FY2020 witnessed a remarkable uptick, reaching ₹1,398.03 lakhs, compared to ₹373.27 lakhs in the same quarter of the previous year. This significant increase in profitability underscores the company's improved operational efficiency and market performance.

Nine-Month Performance

For the nine-month period, Asian Energy Services reported a revenue of ₹16,117.92 lakhs, up from ₹15,097.48 lakhs in the previous year, indicating sustained growth over a longer timeframe.

Improved Earnings Per Share

The company's basic earnings per share (EPS) showed considerable improvement, rising to ₹3.67 from ₹0.98 year-on-year, reflecting the positive impact on shareholder value.

Strategic Acquisition

In a significant move, Asian Energy Services acquired an additional 51% stake in Optimum Oil & Gas Private Limited. This acquisition has transformed Optimum Oil & Gas from a joint venture to a subsidiary of Asian Energy Services, potentially strengthening the company's market position and operational capabilities.

Ongoing Challenges

Despite the strong financial performance, the company faces some challenges:

1. Arbitration proceedings are ongoing related to a performance bank guarantee of ₹1,225.00 lakhs.
2. A subsidiary of the company is involved in a dispute over a USD 2.00 million settlement payment.

These legal and financial challenges may require careful management attention in the coming quarters.

Financial Highlights Table

Asian Energy Services' strong Q3 performance, marked by significant revenue growth and profitability improvement, indicates a positive trajectory for the company. However, the ongoing legal challenges and disputes highlight the importance of managing risks alongside growth strategies in the oil and gas services sector.