Wednesday, March 28, 2012

Kirloskar Pneumatic’s Promoter Group Ups its Stake Again

Rahul Kirloskar,
Executive Chairman,
Kirloskar Pneumatic.

Kirloskar Pneumatic Company Ltd (BSE: 505283) counter in BSE on Tuesday witnessed a significant buy of 84,000 shares by its promoter group company, Kirloskar Brothers Investments Ltd.

This buy is the second time within the last two months that the promoters have upped their stake in Kirloskar Pneumatic Company. 

Tuesday’s buy was at Rs. 489.89 a share, making the buy worth Rs. 4.12 crore. The buy amounted to an additional 0.65% stake for Kirloskar Brothers Investments in the company. 

There were no identifiable sellers as counterparties for Tuesday’ significant buy by the promoters. 

Kirloskar Pneumatic is a leading player in the Compressed Air, Air-conditioning, Refrigeration and Hydraulic Power Transmission sectors in India. It is a part of the Kirloskar Group, one of the largest engineering and construction conglomerates in the country. The Group is also noted for its partnership with global auto major, Toyota, in India.

Earlier, on 17th February, the same promoter group company, Kirloskar Brothers Investments, had picked up 1.07 lakh shares at Rs. 489.95 a share, when DSP BlackRock Mutual Fund offloaded 1.06 lakh shares of Kirloskar Pneumatic. 

The buy on that day amounted to Rs. 5.22 crore and made up 0.83% stake in Kirloskar Pneumatic.

Apart from these identified buys, Kirloskar Brothers Investments had also disclosed to BSE on 22nd March about other slightly smaller market purchases in Kirloskar Pneumatic stock, measuring up to an additional 0.44% stake, the majority of which was executed on 22nd March itself.

On Tuesday, Kirloskar Brothers’ disclosure filed at BSE reveals that after all these purchases, their current stake stands at 52.82%. As on Q3 end, it stood at 50.58%, which makes the total stake upping in Q4 at 2.24%.

The total promoter group stake in Kirloskar Pneumatic was at 55.85% as of Q3 end, and it now stands enhanced at 58.09%.

Interestingly, despite all these buys by the promoters since February mid and till now, the Kirloskar Pneumatic stock has failed to appreciate meaningfully, and was in fact, struggling to keep its head up in recent weeks.

What this signals is that there is significant selling pressure still, probably from other institutional holders. 

Kirloskar Pneumatic has significant institutional holding, which came to 22.67% in Q3, and is dominated by Domestic Institutional Investors (DIIs).

Major shareholders in Kirloskar Pneumatic Company include Reliance Capital Trustee (for Reliance Diversified Power Sector Fund and Reliance Small Cap Fund), Reliance Capital, HDFC Trustee Company, ICICI Prudential, PAC Securities Investment Trust, and Sundaram Mutual Fund.

Reliance Capital and its arms constitute the largest non-promoter shareholder with its total stake coming up to 9.79% as of Q3 end. 

On the fundamental side, Kirloskar Pneumatic’s revenues and profits have been sluggish during the last two fiscals. In the current fiscal year-to-date, however, the company has made a strong turnaround with revenue rising by over 55%, and bottomline soaring by over 141%.

But much of that performance is due to the low base formed in the corresponding nine-monthly period in last fiscal, as well as strong numbers in Q1 of this fiscal . More recent Q2 and Q3 performances continued to be lacklustre.

Reflecting this sluggishness, Kirloskar Pneumatic had fallen significantly with the market in late 2011, correcting from its 52-Week High of Rs. 600.15 on 22nd July to a near 52-Week Low of Rs. 400 on 30th December – a loss of over 33% in a little over 5 months. It had narrowly escaped marking a new 52-Week Low, which still stands at Rs. 396 recorded on 3rd June.

On Tuesday, buoyed by the demand due to this promoter buy, Kirloskar Pneumatic closed up by 7.44% at Rs. 484.35. On Wednesday, it opened up by 0.55% but is now trading down by 2.74% at Rs. 471.10 on relatively low volumes, and in a market which is down by more than 1%.

Though the fundamental performance of the company is yet to deliver a confirming turnaround performance, it is comforting for its public investors that the promoter group has upped its stake, thereby defending the stock price.

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