Tuesday, February 14, 2012

Lovable Lingerie Sold by DSP BlackRock, as Q3 Results Disappoint

By Staff Reporter

Lovable Lingerie Ltd (BSE: 533343, NSE: LOVABLE) on Monday had  significant sells of 86,873 shares by the Mutual Fund, DSP Merrill Lynch, amounting to 0.52% of the total shares in the company. DSP Merrill Lynch Mutual Find is the old name of DSP BlackRock Mutual Fund.

Offloads by DSP BlackRock MF occurred in NSE. Notably, 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 Lovable Lingerie already hold a nearly 67% stake, which is relatively high by Indian standards.

Lovable Lingerie Ltd is a leading manufacturer of women’s innerwear in India. Their notable brands include Lovable, Daisy Dee, & College Style, licensed from Lovable World Trading Company USA, Maxwell Industries, & Levitus Trading Hong Kong, respectively. Lovable Lingerie’s products in India include brassieres, panties, slips / camisoles, homewear, shapewear, foundation garments and sleepwear.

DSP BlackRock Mutual Fund is a leading MF in India, managed by DSP BlackRock Investment Managers Pvt. Ltd., which is a joint venture between India based financial services firm DSP Group, and US based asset management company BlackRock Inc. While DSP BlackRock manages assets in excess of Rs. 41,500 crore, BlackRock Inc (NYSE: BLK) is the largest listed asset manager in the world, managing assets in excess of $3.66 trillion, which is higher than the total market capitalization of the Indian stock market.

DSP Merrill Lynch has been one of the oldest Mutual Funds in India. DSP BlackRock came into existence in 2008, when Merrill Lynch sold its stake in DSP Merrill Lynch MF to BlackRock Inc, as part of a global deal inked in 2006 in which Merrill Lynch sold off its asset management business to BlackRock Inc, in return for a financial stake in BlackRock. 

Lovable Lingerie Ltd which had its IPO towards the end of FY’11 has been one of the better performing IPOs in calendar year 2011. Priced at Rs. 205 a share, the Lovable Lingerie IPO was subscribed more than 35 times. The issue had an impressive listing on March 24th 2011, and since then it hasn’t touched the issue price. 

Lovable soared from its 52-Week Low of Rs. 236.10 recorded on March 25th, the second day after listing, to a 52-Week High of Rs. 636.50 on 7th September 2011, registering peak gains of over 195% from the issue price.

This market performance reflected Lovable Lingerie’s fundamental performance in Q1 when it achieved 50% of previous fiscal’s profit and over 45% of previous year’s revenue in the first quarter of this fiscal itself. But by Q2, the slowdown in momentum was evident, with revenue falling 25% and net profit falling by almost 35%, both on a QoQ basis.

The scrip started tanking, falling steadily until it reached a low of Rs. 278 on 19th December, losing more than 56% from its peak value, aided also by the sharp correction in the general market. However, it was noteworthy that Lovable Lingerie didn’t go down as deep as its 52-Week Low.

Expectations about a turnaround in Lovable’s business was rather high, as seen from the scrip’s active participation in market’s rebound rally, in which the scrip gained nearly 73%. But that expectation has been killed by the Q3 results.

Lovable Lingerie announced third-quarter results on Friday, and it is noteworthy that DSP BlackRock’s sell has come on Monday itself, the next trading day. In Q3, net profit has fallen again, dropping by 23% from the September quarter. But more worrying is that this was despite revenue marking a modest growth of 0.28%, which signals margin pressure. Net Profit Margin (NPM) stands at 9.97%, way down from the impressive 15% during the post IPO quarter.

DSP BlackRock has effectively used the first relief rally after the fall, as it has become doubtful whether the recent rally will be sustainable. It will be interesting to watch in the coming days, how other institutional investors in the counter would behave after DSP BlackRock’s sell. Other institutional investors in the counter include SCI Growth Investments, Ironwood Investment Holdings, Saint Honore Inde, and Rising India Focus Fund, some of whom seems to be in a lock-in period now. 

DSP Blackrock Micro Cap Fund is also an investor with 1.57% stake as of December 31st. The current sell was by the sub-account DSP Merrill Lynch Fixed Term Plan.

Due to weak Q3 numbers and DSP BlackRock MF’s significant sell, Lovable Lingerie Ltd closed Monday’s trade 12.08% down in NSE at Rs. 402.95. DSP BlackRock’s sell was at an average price of Rs. 418.24.

Lovable Lingerie opened today’s trade in NSE, slightly down at Rs. 402, went up to a high of Rs. 422.80, but is now trading at Rs. 411, up by only 2%. 

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