Pulp attraction

For a majority of Dalal Street watchers, the name Dilipkumar Lakhi may not ring a bell. But the owner of Lakhi Group of companies, one of India’s biggest diamond traders, holds a clutch of investments which are currently worth Rs.270 crore. He owns stakes in companies such as Welspun Enterprises, Karnataka Bank, Lakshmi Energy and Foods, Zee Media, Hinduja Ventures, Mount Shivalik, Dhanlaxmi Bank and Uflex.

Of late, Lakhi has taken a fancy to International Paper APPM, formerly known as Andhra Pradesh Paper Mills, which has a Rs.1,200 crore market cap. The paper mill was acquired by the US-based International Paper in 2011. One big advantage for International Paper APPM is that it has got a majority exposure to B2C business which is manufacturing writing, copier and printing papers. For the first time, following the takeover, the company ended in the black in FY16.

The changing fortunes of the company prompted Dilip Kumar Lakhi to gradually start accumulating the stock from the open market. He made his first transaction in January this year, by buying 200,000 shares (1.35% stake) at Rs.229.99 a share. Since then he has bought stocks in six tranches, including the recent acquisition of 162,216 shares at Rs.280 a piece, taking his average acquisition price to Rs.258 a share. Post this transaction, the diamond trader now cumulatively holds 5.23% in the company, currently worth Rs.60 crore, translating into a gain of 12% at the current market price

While the company’s turnover over the past four years has been hovering in the range of Rs.1100 crore, it made a profit of only Rs.37 crore in the previous fiscial. Incidentally, despite an operating margin of 15%, profit is just 3% of sales. And that’s largely due to high interest cost. The company though is taking efforts to rid the balance sheet of excessive debt. In the past three years, debt has come down by about Rs.90 crore to Rs.450 crore, bringing down the company’s annual interest outgo from Rs.55 crore in FY13 to Rs.40 crore by the end of FY16. Looks like International Paper is going to be yet another gem in Lakhi’s portfolio.