Monday, June 4, 2012

Venkys Stake Bought by DHFL

Anuradha J Desai,
Chairperson, Venky's (India) Ltd.

By Assistant Editor:

Venky’s (India) Ltd [BSE: 523261, NSE: VENKEYS] counter in BSE on Monday witnessed a major buy of 77,000 shares by the listed NBFC, Dewan Housing Finance Corporation Ltd (DHFL).

This was disclosed at Bombay Stock Exchange after trading hours on Monday.

Through the deal, this NBFC having its core business as home loans, has picked up a significant 0.82% stake in the hatcheries & poultry major of India, which also has a global footprint.

At Rs. 444.24 a Venky’s (India) share, Monday’s deal has cost DHFL Rs. 3.42 crore. Though not a very large deal by absolute size, it is nevertheless interesting.

Firstly, the clearly identifiable buy has come in after the Venkys scrip has soared by a steep 38% swiftly from its 52-Week Low of Rs. 322.05 recorded just two weeks back, which hints that this is likely to be a follow-up buy.

Secondly, though DHFL has a selective investment portfolio in India, it is more known for its financing activities, which includes lending against share pledging.

Recently, there has also been a buzz around a probable sale decision of an overseas sporting asset owned by the Venky’s.

The company which had purchased the English football club, Blackburn Rovers, back in 2010 for $37 million, and pumped more money into it later to clear debt, had been unable to prevent a slide in its performance which recently culminated in its relegation to a lower soccer league, thereby causing speculation that Venky’s might sell it off.

On the fundamental side, the company has posted a major turnaround in the recently announced Q4 results, with net profit up by 17% year-on-year and revenue up by 23%. The sequential turnaround was even larger, but is due to the low base in the previous quarter.

Venky’s stock has been on a steady fall since the last two years, but the recent turnaround has ignited interest again in the scrip.

One fundamental quality of the scrip is its small equity base, and its high appreciation even in this beaten down state is noteworthy.

Major investors in this small-cap counter are Reliance Capital Trustee Company and HSBC Midcap Equity Fund. 

The stock doesn't have significant institutional participation, and the majority of its 5.43% institutional investment is by DIIs. The promoter participation is healthy at 56.12%.

Though the scrip is currently overheated, Venky's seems to have corrected its long-term downward trend for now, and may soar further on a good set of numbers in the next quarter, which will not only confirm the turnaround but ensure that the annual bottomline is finally on the growth track after more than two years.

On Monday, there were no identifiable sellers offloading more than 0.50% stake, and the scrip soared more than 12% showing buying pressure.

Venkys closed trade with a notable variation in India's two exchanges, with it closing at Rs. 436.05 in BSE, up by 16.67%, while the NSE close was at Rs. 419, up by 12.23%. Volume was higher in NSE, while the buy by DHFL was at BSE.