The rumour in the market was that Ajay Gupta and Kailash Gupta (the founder and Ajay Gupta’s father in law) were having a dispute and Ajay was leaving the company. That is why they had applied for the inter se transfer of promoter holding to SEBI.
Apparently that is not the case, and they just wanted to create a family trust to to make their holding more tax efficient.
However, I was expecting some confidence boosting measure from the management like buying from the open market and disclosing that to BSE/NSE. That would have gone some way in assuaging investor concerns.
Although, no one can guarantee management pedigree these days, the presence of Tata personnel on the board and other non-promoter directors does provide some comfort.
The board of directors comprises of Mr. Sevantilal Popatlal Shah (Retired General Sales Manager, Tata Motors Limited), Mr. Akhil Awasthi (Nominee Director from Tata Capital) , Mr. Praveen Kumar (Former Member - Mechanical, Railways), Mr. Ravi Gupta (Ex-Member , Central Excise Regional
Advisory Committee) & Mr. Sudhir Kumar Vadehra (Managing Director, Kewaunee Labway Asia PTE Ltd. Singapore) and the promoters - Mr. Kailash Gupta and Mr. Ajay Gupta.
ET Now: Are any of your large non-promoter shareholders selling the stock in the market and as you said promoter holding being at around 56%, how much of a per cent is pledged?
Ajay Gupta: We do not know of anyone who is selling. That is something that the market would be knowing. I have no idea on that, in fact. The loan is about Rs 5 crore, the total number of shares pledged are about 18 lakh against the equity of 5 crore 50 lakh. So about 3.5-4% at best is pledged through Religare.
India Max sold the shares for around R48.30 per share which amounted to R4.59 Cr. It held 4.56% stake as on Decembera12 shareholding pattern. Its previous sale was in June last year.
Another significant seller in the counter was one individual, Prashant Desai which sold more than 7.32 lakh shares for about the same price of R47.98.
Purely on numbers it is screaming buy, but not able to understand the reason for steep fall. Will wait for some time, till the reason becomes more clear. If significant SHs are selling for no apparent reason, it raises some concern. Only situation in which I will avoid this stock, if some corporate governance issues come to light.
From the analysis of India max historical SH pattern and avg price during the quarter of acquisition, I think their sale is more a case of capping the losses as yesterday share price was still slightly above their initial acquisition price of the stake sold.
If the significant shareholders knew something that others did not, they would have got out much earlier. This does give exit opportunity everyday and it looks like they have finally thrown in the towel. I have put in a stoploss buy order for a small quantity and intend to accumulate when this starts trading.
A financial entity called SS Corporate Securities Limited had bought three lakh shares at Rs47.65. Prasant Desai sold 4,02,398 shares at Rs47.98. Earlier, he had purchased 10 lakh shares at a price of Rs101. FII holdings have actually come down from 15%, since the IPO on October 2010, to less than half of that – around 6%.
this ss securities is promoted by a certain guptaji… maybe a relative??? else he must have guts !
whois Prashant Desai: Prashant Desai, a chartered accountant and Biyanias chief investment officer (or Head of Investor Relations) for many years is slated to join Antique Capital, a boutique investment firm, as a partner with two others. The man was slated to head Kishore Biyanias ambitious project Future Ventures. Senior industry sources who know him well said itas a big loss for Pantaloon Retail as he is a `thorough guy with great contacts in the investor community. We are surpised Biyani let him goaa. This will be the second top-level exit from the Future Group, the first being Sanjiv Gupta (who was a managing director in Indivision Capital) who moved on to float an infrastructure fund a Vision Global a with Srei Group and US headge fund, Fursa. Desai started his career in Kolkata with a consultancy firm, and was later picked up by Biyani, who also started his venture in the city. A very close confidante of Biyani, he was engaged in all non-operational matters, from raising funds to striking mergers and aquisitions. In between, he left to join Rakesh Jhunjhunwalaas firm but came back to Pantaloon soon after.
I found following arguments in money life article for possibility of something wrong in the company. I have no investment in the company and unless there is some clarity no intention to buy, but just presenting my thoughts in blue on money life arguments:
Resignation of CFO: 1) On 1st December 2010 CEBBCO announced that the Chief Financial Officer Abhijit Kanvinde, resigned with effect from November 30, 2010. Mr Kanvinde was the at the time of the IPO 2) On 7th February 2012 Mr. Amit Jain, CFO, resigned and Mr. Abhijit Kanvinde was appointed as the CFO again. [I think the fact that same CFO agreed to join again, atleast shows that earlier Abhijit might have left for better opportunity or conflict with mgt, but very less probability that he left because of existence of some fraud]
On 10th August 2011 CEBBCO informed the stock exchanges BSE that Mr. Bharat Bakhshi, nominee director of New York Life Investment Management Fund (FVCI) from the board of CEBBCO. He was a director at the time of the IPO. [I guess it is more to do with the fact that, fund intend to divest its stake and as a practice, before fund divest their stake they resigned from BoD to protect themselves from inside trading allegations. By June 2012, fund divested its stake completely]
Mr. Shyam Mani was appointed [Aug. 2011] as additional director on the board of the Company after resignation of New York nominee director. On 30th January 30 2012, Mr Shyam Mani resigned. He was with the company barely there was six months. The Board decided that Mr. Kailash Gupta, CMD should request Mr. Mani to continue but Mr Mani obviously had made up his mind and so on 15th February 2012 the Board accepted Maniâs resignation.
On 15th December 2011 Mr. A. K. Rao (Independent Director) resigned and Mr. Praveen Kumar was appointed as an independent Director of the Company. Mr. AK Rao was an Independent Director prior to the IPO
CANARA
ROBECO MUTUAL FUND and India Max Inv fund have exited totally. AS per my calculations Canara had around 1% stake in Dec-12 [source: Valueresearchonline.com] and India Max had around 4.6%. There were some abnormal high volumes. Some appears to be from high volume trading firmCROSSEAS
CAPITAL. Infact Crosseas volumes itself amount to 41.16 lakh which is around 20% of the combined volumes on BSE and NSE. There seems to be some genuine buying too from firms likeMARYADA
BARTER whose name appears at the time of attempted takeover of Tide water
Date
Client Name
Remarks
Buy/Sell
Quantity Traded
Trade Price / Wght. Avg. Price
Abnormal transactions
% stake
05-Feb-13
CROSSEAS CAPITAL SERVICES PVT. LTD.
cost trading platforms for high volume day traders
BUY
1,029,492
48.5
1.9%
05-Feb-13
CROSSEAS CAPITAL SERVICES PVT. LTD.
cost trading platforms for high volume day traders
SELL
1,030,086
47.8
1.9%
05-Feb-13
JAYNEEL SECURITIES PRIVATE LIMITED
Active entity in market, but no details available
BUY
393,547
47.1
0.7%
05-Feb-13
JAYNEEL SECURITIES PRIVATE LIMITED
SELL
393,547
47.1
0.7%
05-Feb-13
NIRANJAN T PRAJAPATI
BUY
288,233
44.3
0.5%
05-Feb-13
NIRANJAN T PRAJAPATI
SELL
288,233
44.1
0.5%
05-02-2013
CROSSEAS CAPITAL SERVICES PRIVATE LIMITED
cost trading platforms for high volume day traders
Sell
1028281
48.5
1.9%
05-02-2013
CROSSEAS CAPITAL SERVICES PRIVATE LIMITED
cost trading platforms for high volume day traders
Buy
1028875
47.8
1.9%
Normal transactions
05-Feb-13
CANARA ROBECO MUTUAL FUND
Appear to have exited fully from across all its funds
AxisDirect has come up with a buy recommendation, they have reduced target from 123 to 113. Axis bank has funded WC loan, though there might not be any direct relation with the investment arm.
I am not familiar with the business, but felt compelled to look up. Read up the discussion here and Abhishek’s and Rudra’s blogs to bring myself upto speed quickly.
Here are some immediate thoughts:
Let’s take Corp Governance issues are not there.
Business Quality is not great. It will keep having cyclicality/other issues from time to time. Past track is chequered. Odds of sustained success therefore were never that great/certain. RoA/RoE is really poor. The real pull for the stock was the superlative growth registered so far. But this has slacked dramatically in last 3 months, Avg WC at 30%+ of Sales is getting further stretched and may end up similar to 50% levels as in the bad years. FY14 no more looks that good.
One way to look at the easy capitulation by invested HNIs/Funds - these guys have very good insights/visibility into current operations and near to medium term outlook. If things ahead looked as promising as before, they might have held on. They didn’t. So the stock isn’t into real strong hands, who are in for the long term.
May not be worth that punt. There are better more certain bets around.
Would love some rebuttal to keep refining our thinking/selection criteria.
First of all it was never and it will never be a secular growth story driven by increasing penetration of FBV. Thatâs the story that all the brokers have sold till date. First of all itâs the headline number of 20-25% penetration is the wrong way to look at it. The entire penetration is in tipper segment which account for hardly 20-25% of CV segment and trucks which account for 60%, penetration is less than 5% [Source for penetration no. Emkay global report]. Company derives 50% of its revenues from tippers and ~60% of its revenues come from Tata Motors [FY12], itâs near term performance is dependent on continued demand in tippers/Tata Motors. So in simple words it was and will remain a cyclical play till there is institutionalisation in transport segment like in mining and construction. Donât expect unorganised sector to pay 30-50% premium to get the body work from organised player and forgo option of overloading.
Fabrication is a Low entry barrier business. When the growth picks up, existing players can expand the capacity or new players can easily enter putting pricing pressure.
With weakness in road tariff, mess in mining and construction sector, CV volume and more specifically tipper volume will remain under stress. Tata motors have reported 50% y/y decline for last 3 months and Ashok Leyland has declared a day off every week to control excess inventory
Reasons to buy:
One of the best companies to play cyclical theme for commercial vehicle. Around 45-50, stock will be trading around BV and will provide 3-4% dividend yield for FY13 [quite possible that profit may crash in FY14 if CV sales do not recover for next 6-9 months]
A Tier I supplier in auto ancillary business has to go through a trial period of 18 months to prove its quality with the leading OEMs.
At current price, secular increase in FBV is not factored in. Infact, now it is rightly being treated like any other cyclical play for eg. ZF steering which trades around BV. Ofcourse, ZF steering enjoy huge entry barriers and enjoys high and consistent margins.
I do not think anyone can time or predict the peak and trough in cycles. As Howard Mark says you need to understand where you stand in terms of cycle. We are in downturn cycle for CV and now stock price correctly reflects that. Taken a starter position, as I am not yet done with my analysis. My main worry is to what extent competition can take away the upside when growth starts and the consequent pricing pressure.
IMHO, The way to invest in cyclical is to restrict investment in each company to around 3-4% and find additional companies in same sector and one can thus take the exposure to around 10% with the help of 2-3 companies. SIP is the best way to invest in cycles. If one invest in sound companies in cyclical downturn, there ispossibilityof getting multi-baggers.
in Lacs