Monday, June 11, 2012

CEBBCO Stake Sold by New York Life, Closes Up

Ajay Gupta,
Executive Director,

By Special Correspondent:

09:00 PM IST, Monday, 11th June 2012

Commercial Engineers and Body Builders Co Ltd (BSE: 533272, NSE: CEBBCO) on Monday witnessed a major sell of over 12 lakh shares by the FII, New York Life Investment Management India Fund FVCI II, in NSE.

This was disclosed at National Stock Exchange after Monday’s trading hours.

New York Life Investment Management’s sell amounts to a significant 2.19% stake in CEBBCO. The FII has raised Rs. 8.52 crore through Monday’s offloading.

Interestingly, despite New York Life’s sell, the shares of the vehicle & locomotive body builder closed up by 3.72% in NSE, revealing good buying pressure.

There were identified buys on Monday, for 5.85 lakh shares, which is approximately half of the quantity that New York Life Investment sold off. While brokerage firm SS Corporate Securities Ltd bought 3 lakh shares, RP Computer Forms Pvt Ltd bought 2.85 lakh shares.

Though the profile of the buyers as well their buys on Monday are not very convincing, the counter has managed to stay comfortably in green, even on a day when Indian market closed slightly in red after showing initial promise of rising.

New York Life Investment Management has been on a continuous selling spree in the CEBBCO counter since end of March 2012. The FII has sold significant stakes in March, April, & May.

NYLIM was the largest non-promoter shareholder in CEBBCO during Q3 with a 11.94% stake. However, the Q4 Share Holding Pattern (SHP), which is the latest available, shows that the FII had reduced it significantly to 7.31% by March end.

New York Life’s mandatory disclosures after its sell in May showed that it had cut its exposure further to 2.90%.

With Monday’s continued sell, NYLIM’s stake stands reduced to just 0.71%, if this institutional investor has not transacted in the counter since its identified sell in May.

In any case, the fund’s action shows a clear and urgent exit strategy from CEBBCO.

Ironically, the stock has performed reasonably during the same period, rising from Rs. 60 during New York Life’s first identified sell in March to Rs. 72.55 as per today’s closing.

This pattern is part of a larger uptrend in the stock, which has risen from its 52-Week Low of Rs. 30.05 marked in early October to a 52-Week High of Rs. 81.90 recorded in late April.

But earlier, after its highly expensive IPO in October 2010 with a listing price of Rs. 127, the CEBBCO scrip had fallen steadily. In fact, its all-time high of Rs. 144.80 was recorded on the listing day. Within the next one year, the CEBBCO scrip had shed 76% of its value, from the IPO price.

New York Life which has been CEBBCO’s largest investor from the IPO days seems to have used the free-fall for averaging, and has utilized the ongoing rally since October to exit the counter almost fully.

In fact, most of its initial institutional investors during the IPO days have exited the counter, except for JF Eastern Smaller Companies Fund.

New York Life’s exit makes Tata Capital Growth Fund I as the largest non-promoter shareholder with a 10.93% stake. 

Interestingly, CEBBCO’s largest client is Tata Motors, and the dominance by this singular commercial vehicle major in CEBBCO’s order book has been one of the key risks in the stock. Tata Motors enjoys special privileges with CEBBCO like its recent decision to offer Tatas a 1.65% discounting on gross sales to effect early payment.

On the fundamental side, the rally since October was due to the significant improvement in financial results in FY’12, compared with the poor performance in FY’11. Sales is up by 116%, while net profit has gone up by over 7 times.

During Q2 and Q3, the promoters had also upped their stake significantly, which now stands at 55.81%.

However, New York Life’s sell cue seems to have come from the Q4 performance, which despite its impressive year-on-year jump, shows that CEBBCO is again slowing down with a sluggish quarter-on-quarter sales growth of 2.71%.

CEBBCO has also invested heavily in its railways coach manufacturing project, which is expected to take significant time to start delivering.

Apart from New York Life, Tata Capital, & JF Eastern, the largest shareholders in CEBBCO are India Max Investment Fund Ltd and Emkay Fincap Ltd.