Thursday, June 21, 2012

Mahindra Finance Sold by Copthall

Bharat Doshi,  Chairman,
Mahindra & Mahindra Financial Services Ltd.

By Special Correspondent:
11:58 PM IST, Thursday, 21st June 2012:

Mahindra & Mahindra Financial Services Ltd (BSE: 532720, NSE: M&MFIN) counter in NSE on Thursday saw a major sell of 12.80 lakh shares by the leading FII, Copthall Mauritius Investment Ltd.

The massive deal was disclosed after trading hours on Thursday, at National Stock Exchange.

Copthall Mauritius, which is a step-down subsidiary of JPMorgan Chase & Co, the largest bank in USA, raised Rs. 80.63 crore by selling M&M Financial stake at Rs. 630.01 a share.

Copthall has been the largest non-promoter shareholder in Mahindra Finance with a 4.47% stake, as of Q4 end. Thursday’s offloading amounts to a 1.23% stake cut in this leading diversified NBFC, belonging to the Mahindra & Mahindra conglomerate.

There were no identifiable institutional investors buying above 0.50% stake in Mahindra Finance, on Thursday. But reasonable buying support was visible, with the stock closing in green, probably due to the steeply corrected position from its 52-Week High, as well as a small recent uptrend that had started.

It is interesting that a large holder like Copthall has resorted to a massive identified sell in Mahindra Finance at a time when the stock was lying low and just starting to move up.

The CMP of Rs. 634 is now nearer to its 52-Week Low of Rs. 590, after having fallen rapidly from its 52-Week High of Rs. 773.95 recorded during end February.

JPMorgan’s Copthall Mauritius account is one of the largest FIIs portfolios in India, especially in the country’s listed financial sector companies. 

It is a leading investor with high stakes in banks like Bank of Baroda, and Union Bank of India, as well as in NBFCs like Housing Development Finance Corporation (HDFC), LIC Housing Finance, and Indiabulls Financial Services. As such, Copthall’s move in Mahindra Finance is likely to be keenly watched by the market.

On the fundamental side, consolidated Mahindra & Mahindra Financial Services had a good year in FY’12, and even its latest consolidated Q4 numbers were good both on a year-on-year as well as sequential basis.

The sell cue seems to be more of a sectoral call, as India’s banks and NBFCs are going through a challenging period due to the prevailing high-interest regime. RBI had recently decided to skip a rate-reduction opportunity, making the situation remain grim for the financial sector players.

Also, despite being a diversified player, Mahindra Finance’s core line of business is auto/utility vehicle/tractor finance in the rural and semi-urban markets, and this segment has recently been slowing down.

Some of India’s banks and leading financial institutions have been facing rating downgrades too in recent days by S&P and Fitch, and such mass downgrades can’t be overruled in the NBFC sector too in the coming days.

On Thursday, Mahindra Finance closed trade in NSE at Rs. 634.35, up by 1.41% in a general market whose key Nifty index was up by 0.87%.