Inside Job

One super stock always triggers the pursuit to find the next, especially from investors who missed the rally. Seldom does the search pay off as well — at best, one ends up with worthy contenders. Be it HDFC Bank or Page Industries, to find companies that can replicate their value creation, seems like chasing a mirage. That does not stop companies from trying though.

In a short span of about a decade — a wannabe Page Industries — Ashapura Intimates Fashion, has made a significant dent in the intimate and relax wear segment with its brand Valentine, clocking robust growth numbers. The stock has been on a strong wicket and what adds to the optimism at this point is the acquisition of shares worth Rs.16.67 crore by its chairman and MD, since the beginning of March 2018. Post this transaction, the promoter’s stake in the firm stands at 46.86%.

While the promoter has bought shares worth Rs.43.15 crore in FY18 so far, he isn’t the only one who has increased his stake. Domestic mutual fund DSP BlackRock has also increased its stake from 3.29% for the quarter-ending December 2016 to 5.06% for the quarter-ending December 2017. DSP BlackRock is the sole MF holding the stock. The overall promoter holding has declined from 67.74% for the quarter-ending December 2016 to 53.71% for the quarter-ending December 2017.

Ashapura has issued Rs.16.25 crore worth of warrants to the Times Group as part of an advertising arrangement. Bennett Coleman and Company had a 1.59% stake in the firm for the quarter-ending December 2017. The firm has also entered into a similar arrangement with Hindustan Media.

The company's strong distribution network and ability to cater to different segments has helped it clock a CAGR of 43% in PAT, over the past five years. Its net sales during the same period have grown at a CAGR of 25%. The high operating efficiency is reflected in its ROCE, which has improved from 18.98% in FY14 to 24.87% in FY17.

The stock has remained rather resilient to the bearish overhang over the past two months. Since the beginning of February, while the benchmark Nifty Free Float Smallcap 100 has recorded a fall of 9.4%, the stock has declined by 1.6% during the same period. At its current price of Rs.450, it trades at a twelve-month trailing P/E of 22.3x.

The completion of the merger with its erstwhile manufacturing subsidiary Momai Apparels, launch of a new brand for men, Tricci, in September 2017, coupled with the firm’s aggressive e-commerce strategy, are expected to drive its growth, going forward.