Tuesday, September 4, 2012

JBF Industries Stake Upped by Promoter

Bhagirath C Arya,
JBF Industries Ltd.

By Tony J, Associate Editor:
Tuesday, 4th September 2012, 09:30 PM IST:

JBF Industries Ltd (BSE: 514034, NSE: JBFIND) counter in NSE, on Tuesday, witnessed a significant buy of 9.5 lakh shares by its main promoter and Executive Chairman, Bhagirath C Arya.

The deal was disclosed at National Stock Exchange after trading hours on Tuesday.

The buy at Rs. 139.25 a share, amounts to a 1.32% stake in the leading polyester chips & yarns player, takes the promoter group’s stake from 42.76% to  44.08%.

As of June end, promoter group hasn’t pledged any of its stake.

BC Arya invested Rs. 13.23 crore on Tuesday to pick up the additional stake. His direct stake as of the latest available Share Holding Pattern (SHP) for the June quarter was 28.76%. 

Thursday’s buy was against an equivalent sell by JBF Employees Welfare Foundation which raised Rs. 13.23 crore selling the same quantity at the same rate.

This fund is not part of the JBF promoter group, but has been the company’s largest non-promoter shareholder.

Though the insider nature of Tuesday’s seller as well as the non-availability of any external institutional buyer, are negatives, the fact that the promoter has come forward to buy and avoid a potential distribution, should be a positive for the scrip. 

Also, the polyester chips maker with operations in India and Middle East, already has healthy institutional participation of 25.39% dominated by Domestic Institutional Investors.

Apart from JBF Employees Welfare Foundation, largest institutional investors in the counter are the leading DIIs, ICICI Prudential, Life Insurance Corporation of India, HDFC Mutual Fund, Sundaram Mutual Fund, Reliance Mutual Fund, and the FII, Royal Bank of Scotland PLC as Trustee of the Jupiter India Fund.

Despite Tuesday’s sell, JBF Employees Welfare Foundation, remains the largest non-promoter shareholder, ahead of ICICI Prudential, with a 5.47% stake if this employees welfare fund has not transacted in the counter since June end. ICICI Prudential’s stake stands at 4.91% as per the latest SHP.

On the fundamental side, JBF Industries has been a robust performer between FY’08 and FY’11, with consolidated sales growing by 2.36 times, net profit jumping by 4.61 times, and Return on Equity (RoE) peaking at an impressive 37.57%.

But in FY’12, net profit almost halved, on surging interest costs as well as higher operating costs. Even in the most recent June quarter of FY’13, JBF continues to struggle, with topline dipping sequentially and bottomline dipping year-on-year. 

However, the beginning of a turnaround may be detected in sales growing year-on-year and net profit showing an up-tick sequentially.

Tuesday’s buy by the promoter will make JBF Industries’ upcoming Q2 results worth a watch by the investors in the counter, to see whether this slight turnaround is maturing.

The stock has been ripe for some profit booking, having run up from a 52-Week Low of Rs. 89 in January to a recent 52-Week High of Rs. 151.30.

The identified sell by JBF Employees Welfare Fund and the buy by the promoter has come in after the stock has corrected with the general market in recent days.

JBF’s main products are textile grade & film grade polyester chips, bottle grade PET, partially oriented yarn (POY), fully drawn yarn, and polyester textured yarn & sewing threads. It has manufacturing facilities in India as well as in RAK in UAE.

Though the EBITDA as well as Net Profit Margins of JBF’s business is no more very impressive, the stock has a reasonable dividend yield of 5.75%.

The stock’s immediate direction will be set by the calls taken by its institutional investors, whether they would trim their holdings using the rally, or take a cue from promoter group upping its stake.

On Tuesday, JBF Industries closed trade in NSE at Rs. 139.55, down by 0.53%,  whereas Nifty closed flat, up by 0.39%.