Thursday, February 2, 2012

Aban Offshore Sees Significant Buy by FII Goldman Sachs

Aban Offshore Ltd (BSE: 523204, NSE: ABAN) counter today witnessed a significant buy of 4.48 lakh shares by the FII Goldman Sachs Investments Mauritius Ltd, which amounts to around 1.03% of the total shares in the company. This significant buy was undertaken by Goldman Sachs in NSE.

Aban Offshore is India's largest offshore drilling contractor in the private sector, offering drilling and oil field services for offshore exploration and production of hydrocarbons to the oil industry in India and abroad.

Goldman Sachs Investments Mauritius Ltd is one of the eight Indian FII accounts of the US based leading investment banking and securities major, Goldman Sachs Group.

Interestingly, the massive buy of Aban by Goldman Sachs today was not against any selling by any identified institutions or promoters, but probably picked up from the wider market. In the Indian market, buyers & sellers are identified only if they buy or sell over 0.50% of the total shares in the company.

Aban Offshore has a healthy promoter’s stake of 54.11% as per the latest Share Holding Pattern (SHP) for the quarter ending December 31st. In Q2, ending September 30th, the promoters had picked 0.35% stake to reach the current level.

The scrip which had a 52-Week High of Rs. 718.90 at BSE on April 11th, had fallen more than the overall market, almost halving in value to touch a 52-Week Low of Rs. 324.45 on December 20th. 

Today’s buy by Goldman Sachs was executed at Rs. 504.25 a share, which was the peak of Aban’s relief rally at around 55% rebound from the 52-Week Low. However, due to Goldman Sachs’ buying interest, Aban closed trade in NSE at Rs. 544.35, which is already an unrealised gain of around 8% for GS from their average buying price. 

The actual unrealised gains may be even higher, if Goldman Sachs had earlier holdings at lower levels in Aban. Q3 SHP shows no holdings by Goldman Sachs, but in India, only holdings above 1% need to be filed as part of SHP.

However, another FII, Nomura Mauritius Ltd, seems to have made a better buy than GS on 9th November. Though Aban slipped even after the Nomura buy, their buying price was much better at Rs. 444.11. It is not known whether Nomura has already started selling this stake.

Aban Offshore’s largest non-promoter investors include Life Insurance Corporation (LIC) of India at 2.94%, which is also the country’s largest Domestic Institutional Investor (DII). Other majors in Aban include the FIIs, GMO Emerging Markets Fund at 2.48% stake and PGGM World Equity B V GEPFEEM at 1.40% stake.

GMO was a major buyer in Aban during Q3, picking up at least 1.48% stake in this last quarter, and they too have accumulated Aban at a much better price than Goldman Sachs.

Aban’s fundamental performance has seen deep erosion during the past three years, with consolidated revenues stagnant, and consolidated NPM slipping from 12.56% in FY’09 to just 2.32% by FY’11. But in H1 of the current fiscal, margins had rebounded to 11.14%, and buys by Nomura and Goldman Sachs largely reflect this turnaround. 

The company had recently published its Q3 results, with consolidated net profit coming in at Rs. 73.14 crore and consolidated revenue clocking Rs. 865 crore. Margins has slipped to 8.46%.

Aban is a company with wide divergence seen between its standalone performance and the  consolidated performance. While its overseas subsidiaries, structured as SPVs, are doing well, the core Indian operation is yet to rebound. For example, in Q3, standalone Aban had registered a net loss of Rs. 54 crore, sharply down from the year-on-year performance of Rs. 54 crore in profit.

The major overhang on the Aban stock is the high interest cost it is incurring, which again showed an uptick in Q3. Recently Aban Offshore had redeemed bonds for Rs. 800 crore at a high coupon rate of 12%. The company is facing another bond redemption in March 2012, for around Rs. 800 crore, which is also expected to be at the same coupon rate.

Given these overhangs and the recent run-up in the price, today’s buy by Goldman Sachs for Rs. 22.56 crore seems to be a contrarian action. But Aban closed today’s trading smartly, up by 14.40% in NSE. 

1 comment:

  1. Very Good analysis. The stock price too is reflecting by its strong move.........I strongly believe the redemption will pass smoothly by 15 March. After that, stock should zoom by 10% at least crossing 550.............Good Work by your team.....InvestoMint.