Monday, February 6, 2012

VIP Industries Witness Sell by the FII, Acadian Asset Management

By Staff Reporter

VIP Industries Ltd (BSE: 507880, NSE: VIPIND) saw a significant sell of 7.53 lakh shares by the FII, Acadian Asset Management, which amounts to around 0.53% of the total shares in the company. The noteworthy sell was on the last trading day, 3rd February, in NSE.

VIP Industries is India’s leading manufacturer of luggage products, and has a significant presence outside India too, especially in Asian countries. VIP is also the second-largest manufacturer of moulded luggage in the world. Its products are sold in 27 countries across 5 continents, and include items like strolleys, suitcases, duffle bags, backpacks, executive cases, and travel accessories. VIP claims to have a 60% market-share in the organized luggage sector in India.

Acadian Asset Management LLC is a US based financial services firm and global equity manager that specializes in managing the equity funds of several public and private organizations’ pension and retirement benefits. Since the last 12 years, it has been a part of the London based Old Mutual, a prominent listed financial services firm. The sale of VIP on Friday, was by the Acadian sub-account, City of New York Group Trust, a fund that provides pension and other benefits to former and current employees of the City of New York.

Notably, the massive sell of VIP Industries by Acadian was not bought by any identified institutions or promoters, but probably picked up by the wider market. 

The latest Share Holding Pattern of VIP Industries for Q3 is filed in BSE, and the Q3 SHP shows a promoter stake of around 52%, which is healthy by Indian standards.

It is noteworthy that no institutional buyers had come forward to pick up major portions of Friday’s sell, even at these relatively low price levels for the VIP stock. One reason for this may be that the volatility seen in the stock has been unnerving in recent months, with the 52-Week High and 52-Week Low quite close on September 21st and December 21st respectively, but the prices wide apart by 64%. In other words, within 44 consecutive trading days, VIP had shed more than 64% of its market value, from its 52-Week High of Rs. 204.51.

The downfall was led by significant FII exits, whose total stake now stands at 10.96%, down from 13.29% in Q2.

Acadian Asset Management seems to have utilized the very first rebound in the counter to sell. Normally, such investors would have averaged deep down to make a quick exit. 

However, the Acadian sell comes at a time when the stock had rebounded by almost 51% from its 52-Week Low of R. 73.40, which is a recovery range when more investors are likely to be bullish than bearish. 

Acadian’s action is also seemingly contrarian on another front. VIP Industries is expected to announce Q3 results on Tuesday, as well as a decision on Interim Dividend, the record date for which is fixed as February 13th. The fact that this FII didn’t wait for both should offer a clue to the short-term prospects, as more often than not, some institutional investors have exhibited better predictive powers when it comes to results and prospects of listed companies in the Indian market.

On the other hand, Acadian Asset Management may have taken just a personally viable decision, taking its cue from the run-up in the market and scrip, which signals the potential for an imminent reversal of fortunes. 

On the fundamental side, VIP Industries which had a remarkable turnaround in FY’10 from consolidated loss to consolidated profit, had followed it up with a good performance in FY’11 too, with consolidated net profit jumping by almost 84%. But in Q2 of this fiscal, VIP’s performance had deteriorated much with consolidated net profit falling by almost 75% QoQ, and net profit margin (NPM) falling to a low of 6.26%. Another concern with VIP Industries has been a QoQ seesawing nature in both net revenues and net profits for the past several quarters, which shows an unusual inconsistency in the business.

VIP Industries’ main claim to fame in the Indian stock market is that it is backed by celebrity investor Rakesh Jhunjhunwala who now holds a 6.43% stake, as per Q3 SHP. Jhunjhunwala seems to have averaged VIP during its lows by buying an additional 0.51% in Q3. However, during the 2011 bear market, many of Rakesh Jhunjhunwala’s holdings had undergone sharp erosion in value, including VIP Industries.

The sell by Acadian Asset Management was at Rs. 110.68 a share, and VIP Industries had closed Friday’s trade at Rs. 110.05, down by 1.43% in BSE.

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