Wednesday, October 17, 2012

Veer Energy Bought by Clareville Capital

Yogesh Shah,
Chairman & Managing Director,
Veer Energy & Infrastructure Ltd.

By A Vidya, Staff Reporter:
Wednesday, 17th October 2012, 9:30 AM IST:

Veer Energy & Infrastructure Ltd (BSE: 503657) counter in BSE, on Tuesday, witnessed a significant buy of 6.25 lakh shares by the FII, Clareville Capital India Master Fund Ltd. 

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

Clareville Capital India Master Fund is an investment fund run by the noted London based hedge fund, Clareville Capital Partners LLP.

Veer Energy & Infrastructure is a Mumbai based small-cap construction and contracting player focusing on wind-farm development. 

Clareville Capital India picked up the 0.88% stake in Veer Energy at Rs. 12 a share, on Tuesday. As per the latest Share Holding Pattern filed by Veer at BSE, for the June quarter, Clareville was not an identifiably large shareholder in the company, holding more than 1% stake.

However, the institutional buy has come at a relatively very high rate in Veer Energy stock, which has been on a steep bull run since early July. The stock has appreciated by over 550% or 6.5 times in the year-to-date, rising from a 52-Week Low of Rs. 1.87 in early January to a 52-Week High of Rs. 12.17 achieved on Tuesday.

A buy at such a high level may be hinting at earlier buys by Clareville at lower levels.

There were no identifiably large sellers in the stock, offloading above 0.50% in BSE. Veer Energy is not listed in the National Stock Exchange.

The bull run in a small wind-farm company operating mainly in India only, should be surprising to many investors, for the striking contrast with Suzlon Energy Ltd, which despite being one of the world’s largest wind-farm companies, has been on an extended freefall on massive debt woes. 

Apart from the glaring differences in their equity bases and market capitalizations, one core difference is that Veer Energy is just focused on wind-farm development as a civil contractor whereas Suzlon is an integrated player whose group companies also manufacture many core wind-farm equipments.

Veer Energy’s typical contracts include Land identification, Micrositing, Civil Foundation, Erection of Wind Turbines, Electrical Yard & transmission lines, Electrical substation, and Operation & Maintenance.

The 55 MW Chandrodi Wind Park, in Kutch, of India’s Gujarat state, is one of the first and largest projects of Veer Energy.

The promoter group in Veer Energy holds 36.07% stake, which is reasonable, but lower compared to Indian standards.  Institutional holding is healthy at 16.17%, made up fully of Foreign Institutional Investors.

However, the list of institutional holders is not very impressive. Largest holders of Veer Energy are Cresta Fund Ltd, Sparrow Asia Diversified Opportunity, Amrapali Fincap Pvt Ltd, Shriram Credit Company Ltd, Anand Rathi Global Finance Ltd, and Religare Finvest Ltd. Most of them are either not long-only funds or are more of stock market financiers.

Though Clareville's buy of Veer Energy stock on Tuesday amounts to an investment of only Rs. 0.75 crore by the FII, the move is likely to influence the counter, going forward.

On the fundamental side, Veer Energy is noteworthy for its reasonable standalone Return on Equity (RoE) of 18.66% in FY’12, as well as its low debt-equity ratio of just 0.02. 

During the last four fiscals, Veer has grown its sales by 2.42 times, while profit has grown by 3.88 times. Though the equity base expanded by 5.08 times during the same period, much of it was due to bonuses. Also, the equity base is still relatively small at just Rs. 7.11 crore.

Though Veer Energy & Infrastructure is currently in overheated zone, and probable for a reasonable correction due to easy profit booking, it is a small-cap stock worth watching for opportunities.

The company has recently entered into solar energy business in association with NMSEC, a US based company. Veer has also recently claimed that it has a 30 MW windfarm infrastructure development order from China.

On Tuesday, Veer Energy stock closed trade in BSE at Rs. 11.98.