Saturday, February 18, 2012

Gateway Distriparks Sold by the FII Citigroup, on Slowing Momentum

By Special Correspondent

Gateway Distriparks Ltd (BSE: 532622, NSE: GDL) on Friday had  significant sells of 5.52 lakh shares by the FII, Citigroup Global Markets Mauritius Pvt Ltd, amounting to 0.51% of the total shares in the company.

Selling by Citigroup Global Markets occurred in BSE. Interestingly, there were no identifiable institutional buyers or promoters, as counterparties to the sale, which means that the massive sell was picked up by the wider market in both the exchanges.

Promoters of Gateway Distriparks Ltd (GDL) hold a nearly 40.45% stake, which is reasonable and healthy by Indian standards.

Gateway Distriparks Ltd is a leading logistics company in India, which started off with port-based Container Freight Stations (CFS) business, and later diversified inorganically into rail and road based Inland Container Depots (ICD), and into Cold Chain Storage & Logistics.

Citigroup, the multinational financial services major headquartered in New York, is still estimated to operate the world’s largest financial services network, despite the serious hit it had taken due to the 2008 world financial crisis. Once the largest bank as well as the largest company in the world, by way of total assets, today it is only the 10th largest. Yet, Citigroup continues to have a significant presence in global equity markets, including in India.

GDL is an Indo-Singapore joint venture, promoted by a group of India and Singapore based businessmen led by Prem Kishan Gupta of Newsprint Trading & Sales Corporation (NTSC), and Singapore based PIOs Gopinath Pillai of Savant Infocomm and Sat Pal Khattar of Khattar, Wong, & Partners and Parameswara Holdings. 

Friday’s seller, Citigroup Global Markets Pvt. Ltd. is one of the 6 FII accounts that Citigroup operates in India. The Group also runs around 32 FII sub-accounts on behalf of their various funds as well as on behalf of other international institutional investors like Franklin Templeton, Aviva, Axa, Baring etc.

Gateway Distriparks started off with a Container Freight Station at Navi Mumbai in 1998, and has over the years added four CFSs more - a second one at Navi Mumbai itself, and one CFS each at Chennai, Visakhapatanam, & Kochi. Not including the Kochi CFS, GDL now handles 6 lakh Twenty-foot Equivalent Units (TEUs). Kochi CFS, their latest project, is expected to be operational  by next month, and is running slightly behind schedule.

GDL’s Inland Container Depot (ICD) business is run by a subsidiary Gateway Rail Freight Ltd, and started off in 2004 by the acquisition of an ICD near Gurgaon. Later it started three more rail-linked ICDs - one each near Ludhiana, Navi Mumbai, & Faridabad. Gateway Rail owns and operates a fleet of 21 trains and over 235 road-trailers at its rail linked terminals, and operates regular container train service from these dry ports to the maritime ports at NhavaSheva, Mundra and Pipavav. Not a wholly owned subsidiary of GDL, Gateway Rail had attracted investments from Blackstone Group of USA.

GDL had also forayed into Cold Chain Storage & Logistics by taking a controlling stake in Snowman Logistics Ltd, which is a leader in this sector. Snowman has around 20 warehouses for this niche purpose and has a network of more than 100 Indian cities. Snowman Logistics has investors like World Bank arm IFC, Misubishi etc.

Citigroup is known to take relatively bigger stakes in Indian companies than many other FIIs, and currently Citi is a major investor in Indian equity market, holding 5%-20% stakes in companies including Spentex Industries, Sterlite Industries, Himadri Chemicals and Industries, Vaibhav Gems, HDFC, Elder Pharmaceuticals, Dynamatic Technologies, Sundaram Multi Pap, HBL Power Systems, Jindal Stainless, Educomp Solutions, and Ganesh Housing Corporation. Apart from these companies, Citigroup has significant stakes of 1%-5% in around 50 Indian companies. In a few companies, Citi is the largest investor, perhaps the most noted among them being their 9.86% stake in home loan major, HDFC.

Gateway Distriparks has been a good performer on the revenue front during the past four fiscals with consolidated revenue growing by 230%, but on the profits front, GDL has been a dull performer, with last four fiscals witnessing only a 30% growth in consolidated profit, which reveals mounting margin pressure during the last few years. Still, GDL enjoyed a Net Profit Margin of 16.30% in FY’11 which is healthy in the logistics sector.

The fiscal year-to-date or the nine-monthly performance has been good for GDL, on a year-on-year basis, with consolidated revenues growing by 34% and consolidated net profit growing by almost 60%. Due to this above average fundamental performance, GDL stock was one of the least affected in the deep market correction in this same period. And as soon as the market recovered, Gateway Distriparks quickly soared, marking a 52-Week High of Rs. 156.80 in BSE on Friday, the same day that Citigroup sold. 

From its 52-Week Low of Rs. 106.25% on 18th March 2011, the scrip has outperformed the market and most indices during this period with a gain of nearly 48%.

But inspecting the Q3 results, a slowdown in momentum is evident, with consolidated revenue up by only 3.13% and consolidated net profit dipping by 1.35%, on a quarter-on-quarter basis.

Looking closely, the slowdown has affected both the CFS and ICD businesses, with only the smaller Cold Chain Logistics business doing better on both revenue and profit fronts. While CFS was the most affected with both revenue and profits dipping, in the case of ICD only profit was down.

Most probably, this slowdown was enough of a sell cue for Citigroup, especially considering the significant fiscal year-to-date rally in the scrip.

However, it is unlikely that the sell by Citi on Friday signals a full exit strategy by this FII. As of December 31st, Citigroup held a 2.77% stake in Gateway Distriparks. 

Friday’s sell of 0.51% stake was worth Rs. 7.94 crore.

But what the market would be keenly watching in the coming days would be whether other institutional investors in GDL will also take cues from the rally as well as the QoQ slowdown to book partial profits. The answer to that will decide the future of Gateway Distriparks scrip, as the counter has significant institutional shareholding amounting to 43.18% stake, dominated by around 64 FIIs.

Major institutional shareholders in Gateway Distriparks include Fid Funds Mauritius, LIC of India, The Government Pension Fund Global, IDFC, Bajaj Allianz Life Insurance, Swiss Finance Corporation, Indea Capital, Reliance Capital Trustee Company, and DSP Blackrock.

Citigroup’s sell was executed at an average price of Rs. 143.80 in BSE and the scrip closed at Rs. 143.15,  down by only 0.28% from previous day’s close, but more than 8% from the 52-Week High of Rs. 156.80 recorded on the same day. 

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