Tuesday, April 24, 2012

Supreme Infrastructure Accumulated by Kitara, as Mavi Sells



Vikram B Sharma,
Managing Director,
Supreme Infrastructure India Ltd.

By Staff Reporter:

Supreme Infrastructure India (BSE: 532904, NSE: SUPREMEINF) on Tuesday, 24th April 2012, witnessed a massive sell and matching buy by two foreign institutional investors.

In National Stock Exchange, while controversial FII sub-account Mavi Investment Fund offloaded 2.05 lakh shares, noted Oman based PE firm Kitara Capital bought 2 lakh shares. Both deals were at Rs. 332 a share.

The deals were disclosed by NSE, after trading hours on Tuesday. The buy was specifically by Kitara Group firm, Kitara PIIN 1101, which is registered as an FII sub-account under the FII, Kotak Mahindra (UK) Ltd.

Kitara has invested Rs. 6.64 crore through the deal to accumulate a further 1.20% stake in Supreme Infrastructure India.

Supreme Infra’s recently released Share Holding Pattern (SHP) for Q4 reveals that Kitara Capital has acquired a massive 6.58% stake to emerge as the largest non-promoter shareholder. In Q3, its stake was either non-existent or below 1%.  

Mavi Investment Fund has been in the thick of controversies at least during the past one year, due to its alleged involvement in two scams - the 2G scam and the GDR manipulation scam. It is currently facing probes by Central Bureau of Investigation (CBI), Securities and Exchange Board of India (SEBI), and Enforcement Directorate.

Though SEBI had barred Mavi from participating in the Indian equities market through its order in the GDR manipulation case on 21st September, the securities regulator later provided a part-waiver through its January 25th order, on an appeal from Mavi, to sell off certain stocks in its portfolio.

This was allowed in face of the market fall prevailing at that time, and in its January order, SEBI had cited the SAT order obtained by a co-indicted company, India Focus Cardinal Fund, on similar grounds.

Supreme Infrastructure India Ltd is an Engineering, Procurement, & Construction (EPC) contracting firm headquartered in Mumbai. It specializes in roads and bridges, and does much of its work through Special Purpose Vehicles (SPVs) formed for specific toll-based projects following the Build-Operate-Transfer (BOT) model. 

Its clients are mainly India’s central, state, and local government agencies, as well as public sector units. Supreme also has private sector clients for its building construction business.

Like most of its peers in the infrastructure and construction space, Supreme Infrastructure had a difficult time during Q1 & Q2. But in Q3 it delivered surprisingly strong numbers with revenue jumping by nearly 71% and net profit growing by almost 32%.

Backed by the numbers, Supreme Infrastructure had soared in late Q3 and Q4, rising from a 52-Week Low of Rs. 152.50 on 15th December to a 52-Week High of Rs. 346.70 recently, on Friday, 20th April - which is a massive 127% rise within four months. 

This strong turnaround in fortunes seems to be the cue for Kitara’s massive buy during Q4. Interestingly, of the 13.02 lakh shares it holds in the company now, 9.52 lakh shares were picked up at Rs. 250 after the scrip rebounded from its 52-Week Low by 64%, which shows strong conviction on part of the PE fund.

But due to the steep and rapid run-up in prices, identified sellers were also there on March 14th when Kitara picked up this large stake in one go. Sellers including Reliance Mutual Fund had supplied 4.30 lakh shares, amounting to 45% of Kitara’s high demand.

However, soon after, on 29th March, Kitara started accumulating at even higher levels, buying 1 lakh shares at Rs. 288.68.

The buy on Tuesday, 24th April 2012, is again a follow-up by this Middle East fund run by PIOs, but it is a larger buy of 2 lakh shares at an over-heated price of Rs. 332 a share.

The obvious buy cue this time is a recent order win by Supreme Infrastructure India, amounting to Rs. 283 crore. The deal is undoubtedly significant as the company’s nine-monthly revenue in FY’12 was only around Rs. 1000 crore.

However, the prices seem definitely overheated and due for a correction soon, especially since institutions like Mavi Investment Fund have come out as sellers.

The regulatory problems facing Mavi may force follow-up sells in the Supreme Infra counter. Mavi Investment Fund Ltd is an FII sub-account registered under MM Warburg Bank (Schweiz) AG.

However, the real ownership of Mavi is a hotly debated issue in stock market circles, and is also subject of an investigation that India’s CBI is pursuing in Europe with the investigative agencies there. Ownership rumours cited by media include that of controversial stock market investor Nirmal Kotecha as well as a group of diamond merchants and stock brokers. 

As of Q4 end, Mavi Investment Fund held a 5.96% stake in Supreme Infra.

Also, as revealed by the recently released Q4 SHP, during the steep rise, partial sellers have included Reliance Capital Trustee Company, IDBI Federal Life Insurance Company, & Pivotal Securities - all of whom are the largest non-promoter investors in the company, after Kitara and Mavi. 

The promoter group has also sold off a 0.23% stake in Q4, but their stake is still comfortable at 56.61%.

Supreme Infrastructure India is yet to announce its Q4 and annual results, which will set further direction in the stock.

On Tuesday, the scrip closed at Rs. 333.20 in NSE, up by 1.34% from the previous close.

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