Thursday, April 26, 2012

Alok Industries Shares Accumulated by Nomura for Rs. 12.22 Crore

Ashok B Jiwrajka,
Executive Chairman,
Alok Industries Ltd.
By Associate Editor:

Alok Industries Ltd (BSE: 521070, NSE: ALOKTEXT) counter on Thursday, 26th April, witnessed a massive buy of 63.21 lakh shares by the FII, Nomura Singapore Ltd.

This was disclosed by National Stock Exchange on Thursday after trading hours.

The deal carried out in National Stock Exchange was at Rs. 19.33 a share, with no identifiable institutional counter-parties as sellers. Nomura has pumped in Rs. 12.22 crore to acquire a 0.80% stake in the textile major.

This is the second time in the last two months that Nomura is buying Alok shares, and the third time in as much time that an FII is buying the shares.

On 23rd February, Nomura had picked up 55 lakh shares or a 0.70% stake. But unlike on Thursday, there was a major seller in February when Barclays Capital Mauritius offloaded 41.25 lakh shares.

However, quite interestingly, on 30th March, Barclays Capital bought back 58.29 lakh shares from unidentified sellers. While their February sell was at Rs. 22.33 a share, the March buy was at Rs. 19.12 – a good 15% cheaper.

Looking at the latest Share Holding Pattern (SHP) available, neither Nomura nor Barclays held a stake higher than 1% as of December 31st.

On the fundamental side, Alok Industries used to be a high-flying stock a few years back, but a massive 4X equity expansion in FY'10 has not yet yielded proportional results, with net profit improving by only 2X by FY'11 end, thereby weakening EPS and core return ratios.

Though this is also due to the long-gestation nature of textile projects, and the situation may improve over time, the question is whether by that time, another equity expansion would be called for. Recently, the Alok Industries' Board of Directors had given a green signal for a further fund raising of up to Rs.750 crore through any compulsorily convertible instruments. 

And in FY'12, Alok Industries had an even more difficult time, with nine-monthly standalone net profit plummeting by more than 55%, despite revenue growing strongly by over 48%.

Reflecting this challenge, the stock had also corrected significantly in the early part of FY’12 with it falling from a 52-Week High of Rs. 28.50 on 14th June to a 52-Week Low of Rs. 15.60 on 18th August – which is a loss of over 45%.

However, since then, the stock has been largely range-bound with a slight positive bias.

The buy cues for the institutional investors seems to be an expected rebound in Q4 numbers as well as a recent stake upping by promoters from 32.27% to 32.65% through the creeping acquisition route involving market purchases. As of Q3 end, promoter stake was only 29.95%.

However, the Alok Industries' promoters are prone to pledge much of their shares. As of Q3 end, more than 91% of their stake was pledged with various financial institutions and financing companies, and this operational style is continuing, as recent disclosures reveal.

Alok Industries has a high institutional holding of 32.46%, dominated by FIIs. Largest institutional investors in the company include Caledonia Investments, Life Insurance Corporation of India, IFCI, The India Fund, Axis Bank, GMO Emerging Markets Fund, Macquarie Bank, IL&FS Trust Company, BNP Paribas Arbitrage, and IDBI Bank.

On Thursday, the scrip closed trade in NSE at Rs. 19.30, up by 1.58%.

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