Snip And Cut

Reliance Mutual Fund recently offloaded 42,000 shares of Lakshmi Machine Works, as per a disclosure made to the BSE. As per the closing price of June 24 (when the transaction was recorded) the shares were sold for a consideration of Rs.15.4 crore. Post the sale, the holding of Reliance Capital Trustee which holds the shares for Reliance Mutual Fund has gone down from 3.59% to 3.21%.

In recent months, despite a volatile market, the stock has held its own. YTD, the stock is down 5%, over a 6-month period, it is down 3% and over 12 months, the return has been just about positive at 0.5%.

The Coimbatore-based company has been witnessing slower pace of growth in its topline. It clocked revenues of Rs.2,528 crore in FY16; representing a 6% growth. From the 14% growth seen in FY14, the company has grown at about 6% for the last two years.The growth has come off amid a slowdown in demand for textile machinery which accounts for close to 90% of Lakshmi Machine Works’ topline.

However, the management remains positive. According to the textile machinery major, inflows from Indian spinning mills is likely to improve owing to the need to upgrade technology and improve automation. The improvement in yarn demand from clothing manufacturers should also benefit the company. Currently, capacity utilisation is in the range of 60%-65%.

Analysts say any unexpected downside in the textile industry remains a concern as textile companies usually defer delivery of machinery orders during such times and that may hamper Lakshmi Machine Works’ plans to expand capacity.

Domestic fund houses seem to have satiated their appetite after consistent buying. As on Q4FY16, mutual funds’ holding in Lakshmi Machine Works stood at 12.06%, which was 240 basis points lower than what they held in the previous quarter. The cut in mutual funds’ holding has come after 10 straight quarters of increasing stake. From 2QFY14 to 3QFY16, mutual funds’ stake surged from 8.27% to 14.46%.