Saturday, March 3, 2012

EID Parry Sees Sell by Reliance Mutual Fund for Rs. 20.38 Crore

A. Vellayan, Chairman, EID Parry
By Special Correspondent:

EID Parry (India) Ltd (BSE: 500125, NSE: EIDPARRY) on Friday saw  significant sells of nearly 10.40 lakh shares by Reliance Mutual Fund, amounting to 0.60% of the total shares in the company.

The massive sell, witnessed in NSE, was worth slightly more than Rs. 20.38 crore.

Notably, there were no identifiable institutional buyers or promoters, as counterparties to the sell, which implies that the massive sale was picked up by the wider market.

Promoters of EID Parry (India) Ltd holds 45.71% stake in the company, which is reasonable and healthy by Indian conditions.

EID Parry (India) Ltd is a pioneering sugar and alcohol producer in India, and is one of the most profitable in the sector. It also has significant operations in bio-products and nutraceuticals. Its sugar division is noted for its zero-waste factories with alcohol production from molasses, and cogeneration of electricity from bagasse.

EID Parry’s bio-products is dominated by extracts like Azadirachtin from neem seeds which is mainly exported, and eco-friendly bio-fertilizers for agriculture and floriculture. In nutraceuticals, EID Parry’s main products are micro-algal health supplements like Spirulina and Dunaliella salina.

Reliance Mutual Fund (RMF) is a leading mutual fund in the Indian capital market, and a part of the Reliance ADA Group headed by Anil Ambani. RMF is set up as a Trust, and is sponsored by Reliance Capital Ltd (BSE: 500111, NSE: RELCAPITAL), the listed NBFC belonging to Reliance ADAG. 

The Investment Manager of the RMF is Reliance Capital Asset Management Ltd (RCAM), and the Trustee of the mutual fund is Reliance Capital Trustee Company (RCTC) Ltd., which are both unlisted companies belonging to Reliance ADAG.

EID Parry is one of the oldest surviving businesses in India, with its history tracing back to 1788. It is credited with setting up India’s first sugar factory in 1842, and came into the fold of the Chennai-headquartered business conglomerate, Murugappa Group, in 1981. 

Apart from EID Parry, Murugappa Group has listed companies like Carborundum Universal, Cholamandalam Investment & Finance Company, Coromandel International, Tube Investments of India, Coromandel Engineering Company, and unlisted companies like Cholamandalam MS General Insurance and Parry Agro, as well as several smaller companies.

Reliance Mutual Fund has a large portfolio of funds that are diverse by sectors, objectives, and capitalizations. For example, RMF has funds in sectors like power, natural resources, infra, pharma etc., having different objectives like growth, tax-saving, monthly income etc., and focused on differently capitalized companies like small-cap, mid-cap, large-cap etc. 

Due to this kind of comprehensive addressing of the market, as well as its large Assets Under Management (AUM), RMF has holdings in a large cross-section of the Indian market.

The Average Assets Under Management (AAUM) of Reliance Mutual Fund was in excess of Rs. 82,000 crore in Q3 of this fiscal.

On the fundamental side, EID Parry has been a good performer during the last four fiscals, especially on the revenue front, with consolidated revenue increasing by 223% during this period. At the same time, net profit growth was more subdued at 153% during these four years, signaling mounting margin pressures.

Anyway, the bigger shock was in the Q3 results, in which consolidated bottomline has slipped into red with a Rs. 0.81 crore net loss (after minority interest), against a Rs. 18.65 crore net profit in the corresponding year-ago quarter. With this shocking result, the fiscal year-to-date or nine-monthly net profit has dipped by 12.61% (after minority interest), hinting at a lackluster fiscal completion, if not a bad completion.

Though the Q3 bottomline was impacted more by an exceptional item of a non-compete fee paid by one of its major subsidiaries for an acquisition, even the profit before exceptional items and tax is dull with it growing by just 3.63%, on a year-on-year basis.

This poor performance in Q3 seems to have been the sell cue for Reliance Mutual Fund.

However, Friday’s sell by Reliance is only a partial exit for the asset manager, as Reliance Capital Trustee Company holds 3.95% stake, and is EID Parry’s second largest investor. LIC of India, is its largest investor with a 4.86% stake. 

Other major institutional investors in EID Parry are General Insurance Corporation of India, Royal Bank of Scotland as Depositary for two First State Investment Funds, Sundaram Mutual Fund, Government Pension Fund Global of Norway, and DSP Blackrock Equity Fund.

It will be interesting to watch the calls made by other investors in the coming days, based on RMF’s partial profit-booking.

EID Parry stock had corrected from a 52-Week High of Rs. 279 on 28th July to a 52-Week Low of Rs. 176 on 20th December – a loss of nearly 37%. The scrip had since then rebounded strongly with the market, but it couldn’t hold on to the gains due to poor Q3 numbers. It is noteworthy that RMF’s partial sell has come at a time when EID Parry stock is again edging towards its 52-Week Low.

RMF’s sell was at Rs. 196 and the scrip closed Friday’s trade at Rs. 194.15, down by 0.38%. Indian market had a special short trading session on Saturday, and EID Parry closed the trade at Rs. 195, up by 0.44%, but on dull volumes.

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