The Chandaria brothers, Raj and Anish, have taken some money off the table following the stupendous rally in Aegis Logistics. For the uninitiated, Aegis operates a network of shore-based tank farm installations for the handling of bulk liquids. These terminals are located in Mumbai, Kochi, Pipavav and Haldia, and are connected by pipelines to various berths for export and import of hazardous chemicals, petroleum products, and petrochemicals.
Since 2014, the stock has been on a roll, vaulting close to 8-fold to Rs. 121. Year-till-date, too, the stock has gained 29% as against the benchmark Sensex's 6%. Thus, it is no surprise that the promoters sold 33 lakh shares in the open market through Huron Holdings at Rs.120.49 a share (cumulatively worth Rs.39 crore), paring its stake to 34.72% from 35.71%. However, they continue to hold 34.72% (1.15 crore shares), which is worth Rs. 1,378 crore. Incidentally, this is the first instance where the promoters have sold their stake since FY12.
Moreover, it’s not just the promoters selling this time. Even foreign institutional investors like Credit Suisse have sold 37.48 lakh shares, totting up Rs. 45 crore. Interestingly, a portion of the stake sold by both the promoters and Credit Suisse was bought by a bottom-up investing firm, Small Cap World Fund, that mopped up close to 32 lakh shares.
Despite revenue growth falling 17% over the past three years, largely because of the softening of LPG price— profits have shown 53% CAGR. The company earns 93% of its revenues from its gas division, which involves sourcing, shipping and distribution of LPG and propane into India. The liquid business, comprising petrochemicals, contributes the balance. Investors are looking forward to the commissioning of the Kandla storage terminal (100,000 kilo litres) in FY18. With the liquid division, contributing 44% to operating profit, any surge in liquid division revenues should lift the overall margins of the company. The company also plans to ramp up its gas business by increasing the throughput capacity to 1.4 million tonne from the current 1 million.
No wonder analysts are bullish on the stock and expect the outperformance to continue in the coming years, which could be further aided by the implementation of the GST. However, given that the stock is not exactly trading cheap at close to 25-times FY17 earnings, domestic mutual funds have chosen to make the most of the rally by paring their holdings. From over 3% in FY15, overall MF holding in the stock has come down to 1% as of June 2016. But for the Chandarias, the party has just begun.
