Friday, May 25, 2012

Alok Industries Stake Bought by Goldman Sachs

Dilip B Jiwrajka,
Managing Director,
Alok Industries Ltd.
By Special Correspondent:

Alok Industries Ltd (BSE: 521070, NSE: ALOKTEXT) on Friday, 25th May 2012, witnessed a major stake buy by the FII, Goldman Sachs Investments (Mauritius) I Ltd, when it bought 104.39 lakh shares, in BSE.

The deal done at Rs. 19.12 a share was disclosed at Bombay Stock Exchange after trading hours on Friday.

There was a matching seller for the buy, when Nomura Singapore Ltd offloaded 103.84 lakh shares at Rs. 19.13 a share. 

Goldman Sachs has pumped in Rs. 19.96 crore through this deal into the textile major’s stock to get a 1.26% stake.

StockExplain had earlier reported on Nomura’s accumulation of Alok Industries shares on 26th April, when it invested Rs. 12.22 crore to pick up a 0.80% stake. As reported then, Nomura had also picked up a 0.70% stake on 23rd February.

However, when Alok Industries’ Share Holding Pattern for this period was published recently, Nomura didn’t surface as a significant holder with the expected 1.5% stake, and not even with a stake upwards of 1%, which hinted that this FII had sold off part-stake and was having only short-term plans with the stock.

This idea has got further confirmed on Friday, when Nomura sold off 1.26%, which reveals that it had accumulated post-Q4, but only to sell again.

Earlier, StockExplain had also reported on a similar move by Barclays Capital Mauritius when it sold off and bought back significant stakes in Alok Industries within a month’s time in February-March, which shows that these FIIs are using the counter’s stable range-bound movements in recent months for short-term trading purposes.

However, as of Q4 end, Barclays Capital has retained much of its shares in Alok, and has surfaced as a major holder with 1.13% stake, as against no identifiable stake at Q3 end.

In a way, the institutional churn in this counter is rightly reflecting the major changes happening in the company, and different institutions are obviously having different calls on its prospects.

Alok Industries had recently announced its Q4 and FY’12 results, which shows substantial improvement in headline numbers. Q4 sales is up by 18.19%, while net profit is up by 77.73%, both on a year-on-year basis. 

But these numbers are not really comparable, as due to a recent amalgamation, the numbers of former group firm Grabal Alok Impex Ltd has been added to this quarter’s numbers.

Alok Industries stock’s upside has been limited so far by the dual problem of a large equity base as well as a large debt-equity ratio, upwards of 2.5 times.

Though the equity base continues to be expanded to meet various needs, the pace of dilution has slowed down, and the promoters have also committed recently to guard their stake from getting lower.

Promoter stake stands at 31.78% as of Q4 end, which is up by 1.83% since Q3 end. Institutional holding is down from 32.46% in Q3 to 26.45% in Q4, and much of the sells have been by FIIs.

Major institutional investors in Alok Industries are Caledonia Investments, Life Insurance Corporation of India, IFCI, Axis Bank, GMO Emerging Markets Fund, Macquarie Bank, IL and FS Trust Company, BNP Paribas Arbitrage, IDBI Bank, Swiss Finanace Corporation (Mauritius), and Barclays Capital Mauritius.

On the debt side, the company has started selling some of its prime real estate assets in Mumbai and elsewhere, with the proceeds intended to cut its huge debt and the consequent high interest costs.

Though the company is slowing down on its capex in the coming years, if debt is getting cut significantly, the stock can have a positive re-rating in the future.

On Friday, Alok Industries stock closed trade in BSE at Rs. 18.80, down by 0.79%.