Exceptional discharge

It’s been an exceptionally charged year for V-Guard Industries, as the stock has doubled to touch an all-time high of Rs.241. With the market cap nearing Rs.10,000 crore, founder Kochouseph Chittilappilly has decided to bank some of it. Having built not one but two businesses from scratch, Chittilappilly knows that cash is as good a shock absorber as the stabilisers he started out with. Besides V-Guard, Chittilappilly is also the prime mover behind investor darling Wonderla Holidays.   

This was the second instance of selling by Chittilappilly in 2017 after he had disposed 20.8 million shares worth Rs.357 crore in March. Besides Chittilappilly, director and COO, Ramchandran Venkataraman also sold stock worth Rs.2.23 crore recently. Post the recent sale, Chittilappilly’s holding in his personal capacity is down to 18.68% but total promoter holding is still around 65%.

Along with its growth, this high promoter holding might have attracted Nalanda Capital’s Pulak Prasad, whose fund held nearly 7% for the quarter-ended September 2017. The other major institutional holders include DSP BlackRock with 1.44% and Kotak Mahindra (UK)’s India Midcap Fund with 1.23%. Chittilappilly has transformed V-Guard from an unassuming Kochi-based voltage stabiliser manufacturer to a pan-India consumer electrical manufacturer. While stabilisers still bring in 17.6% of the revenue, it is no longer the dominant contributor. Cables and wires (29.3%) along with water heaters (17.6%), both electric and solar, have taken over the mantle. 

Over the past five years, sales and net profit have compounded at 17.4% and 24.5% respectively. There has also been a consistent improvement in firm’s operational performance, with its ROCE increasing from 27.3% in FY12 to 37.77% in FY17. Q1FY18 performance was impacted by the implementation of GST, but the 25% growth in Q2FY18 net profit has sustained the enthusiasm around the stock. V-Guard currently trades at 39x one year forward and analysts attribute that to its nearly debt-free balance sheet, increasing revenue share of non-South states and higher margins in new-products being launched.