Friday, June 29, 2012

Balkrishna Bought by Templeton, SBI, ICICI, Reliance

Arvind Poddar, Chairman & Managing Director,
Balkrishna Industries Ltd.

By Staff Reporter:
01:05 AM IST, Friday, 29th June 2012:

Balkrishna Industries Ltd (BSE: 502355, NSE: BALKRISIND) counter in NSE on Thursday witnessed massive trading when a clutch of Indian and overseas mutual funds bought over 47.73 lakh shares against a major sell by the PE firm, ChrysCapital.

The five buys and one sell were disclosed at National Stock Exchange after trading hours on Thursday.

The buyers in the Indian tyre company, according to their buy sizes, were Franklin Templeton, ICICI Prudential, SBI Mutual Fund, & Reliance Capital Trustee Company.

While two funds from the Franklin Templeton family bought 18.70 lakh shares, ICICI Prudential picked up 12.50 lakh shares, SBI MF took 11.53 lakh shares, and Reliance Capital bought 5 lakh shares.

All the buys were at Rs. 240 a share, and these leading MFs pumped in Rs. 114.55 crore to pick up a collective stake of 4.94%.

However, the sheen of the buy was dulled by the fact that there was an even larger sell on Thursday, of nearly double the collective buy quantity.

Copa Cabana, a subsidiary of ChrysCapital led by noted investment manager Ashish Dhawan, sold off 90.16 lakh shares of Balkrishna Industries (BKT) at Rs. 240.03 a share, thereby raising Rs. 216.40 crore.

This fund has been the largest non-promoter shareholder in this Off Highway Tyre (OHT) maker and exporter, belonging to the Poddar Group. As of Q4 end, Copa Cabana held a 9.59% stake in Balkrishna. Thursday’s sell comes up to a 9.33% stake and is obviously signalling a full exit by ChrysCapital.

Though the sell by one of its earliest backers - ChrysCapital has been an investor in Balkrishna since 2005 - doesn’t bode well for the scrip, it is definitely heartening that heavyweights like Franklin Templeton, SBI, ICICI Prudential, & Reliance Capital were there to buy around half the quantity that was offloaded on Thursday.

Balkrishna Industries stock has had a good run since January, rising from Rs. 155.15 (which was near to its 52-Week Low) to a 52-Week High of Rs. 301.90 towards April end, which was a near doubling in value within four months. The buy by mutual funds have come after the stock has corrected to a reasonable degree from this high.

On the fundamental side, Balkrishna had a strong performance in 2012 with both revenue and profits expanding impressively, but in the latest Q4 numbers, a sequential sluggishness in growth is evident.

Among Thursday’s buyers, relatively new entrants are SBI MF and Reliance Capital, whereas for Franklin Templeton and ICICI Prudential, it was basically accumulation of stakes in BKT.

Other large investors in the counter are HDFC Trustee Company, Credit Suisse, and Emerging Markets Management LLC.

Balkrishna Industries’ equity base is relatively smaller at just Rs. 19.33 crore, and this has enabled the stock to reward its shareholders, whenever the company is performing well.

A current overhang on the stock is whether penal action expected from Competition Commission of India (CCI) against some Indian tyre manufacturers against cartelization, will affect BKT. In any case, due to exports accounting for 90% of its output, Balkrishna is likely to be relatively less affected than its peers.

On Thursday, Balkrishna Industries closed trade in NSE at Rs. 244.85, down by 3.45%.