Friday, February 3, 2012

Sintex Sees Continued FII Interest - Morgan Stanley Buys 0.53% for Rs. 13.47 Crore



By Staff Reporter

Sintex Industries Ltd (BSE: 502742, NSE: SINTEX) counter continued to attract buying interest from major FIIs, for second day in a row, and for the third time in this new calendar year. On Friday, Sintex witnessed a significant buy of 14.56 lakh shares by the FII, Morgan Stanley Asia (Singapore) Pte, in NSE, which amounts to around 0.53% of the total shares in the company.

Sintex is one of the leading manufacturers of plastics, concrete, and niche textile-related products in India. With operations spanning several countries, Sintex has a presence in the European, American, African, and Asian markets including countries like France, Germany and USA. Its plastics manufacturing spans two business segments - building products and custom mouldings, while its concrete manufacturing addresses building products including monoliths used in mass housing. In textiles, it is a leading manufacturer of corduroys. 

Morgan Stanley Asia (Singapore) Pte is one of the six Indian FII accounts of the US based leading investment banking, securities, and financial services major, Morgan Stanley.

Notably, the significant buy of Sintex by Morgan Stanley today was not against any selling by any identified institutions or promoters, but probably picked up from the wider market.

On Thursday, Sintex counter has seen a similar buy, when the FII sub-account EMSAF Mauritius, coming under AshmoreEMM LLC, bought 16.07 lakh shares of Sintex amounting to 0.59% of the company. Like the buy by Morgan Stanley, it too was picked up from the wider market, with no identifiable seller.

AshmoreEMM is a US based leading emerging markets investor, and was created in 2011, when London based Ashmore Group Plc bought majority stake in EMM LLC which has been investing in emerging markets since 1987.

While the AshmoreEMM buy was executed at an average price of Rs. 90.90 a share, it had caused Sintex to soar by over 8% yesterday in NSE. Today it was almost an encore when the Morgan Stanley buy caused Sintex to soar by another 6.62%, to close trading at Rs. 98.25. The buy by MS was executed at an average price of Rs. 92.49.

While Thursday’s buy by AshmoreEMM was worth Rs. 14.61 crore, Friday’s buy by Morgan Stanley was worth Rs. 13.47 crore.

But a smarter buy than both these institutions was made by another FII, Goldman Sachs Investments Mauritius I Ltd, when it picked up 18.60 lakh Sintex shares, measuring up to 0.68% stake, at an average price of Rs. 73.46, on 18th January 2012.

However, even this buy by Goldman Sachs had come after a sharp rebound of nearly 35% had occurred from Sintex’s 52-Week Low of Rs. 54.60 in NSE.

Sintex had fallen steadily and massively from its 52-Week High of Rs. 195 in BSE on May 31st 2011, almost losing three-fourths of its peak value by 19th December 2011, within six months time. 

The fall was initially mysterious to the wider market, as almost all international and domestic brokerages had a BUY or HOLD call on Sintex during the beginning of that period. Later, it was clear that serious concerns regarding their pending FCCBs, poor outlook on fundamental performance, as well as a corporate governance issue regarding lack of timely disclosure in a related party transaction involving a promoter group company had caused the free fall. There is a lingering doubt in the market that whether many of the BUY/HOLD calls during that time was facilitating massive institutional offloading.

For this period, Sintex Industries Q2 SHP shows that though the total FII stake remained more or less stable, major sells were executed by CIFM Asia Pacific Advantage Fund, Sloane Robinson LLP A/c Reliance Growth Fund, Merrill Lynch Capital Markets Espana SASV, and BNY Mellon Emerging Markets Fund. Tata AIG Life Insurance Company Ltd was also a seller during that period.

Sintex Industries’ Q3 SHP shows that nearly 8% stake was offloaded by FIIs in the months of October, November, & December, and that most of it was picked by non-institutional investors. Interestingly, despite this net reduction, Merrill Lynch Capital Markets Espana SASV had upped its stake by a significant 1.64%, in Q3, utilizing the low prices. Their stake now stands at 2.88%.

Other notable institutional holders remaining in Sintex, as per Q3 SHP, include Reliance Capital Trustee Co Ltd A/c Reliance Growth Fund at 2.94%, LIC of India at 2.04%, and Government of Singapore at 1.38%. As of Q3, Sintex has an impressive FII holding of nearly 31% and DII holding of around 9%.

Over the course of these tumultuous movements in the price and holdings of institutional investors, Sintex’s promoter holding has remained stable at around a reasonable 35%. 

On the fundamental side, Sintex had a reasonable year of performance in FY’11, with both consolidated revenue and profits growing healthily. However, the consolidated net profit margin (NPM) was just above 10% only. But it was in this fiscal that Sintex’s fundamental performance deteriorated sharply, and in Q2 it had hit its nadir with an NPM of just 3.32%. 

Sintex Q3 results, which were announced recently, showed a rebound of NPM to around 7%, which seems to be one reason behind the recent FII interest. However, it remains to be seen whether the Sintex counter can maintain its momentum as it has already run up nearly 80% in less than one and a half months time.

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