Renewed Pipeline

Despite reporting losses for two consecutive years, the promoter of India’s leading manufacturer of pumps and pumping systems, WPIL, is confident of his franchise. Through the entity, VN Enterprises, managing director Prakash Agarwal has acquired about Rs.14 crore worth stake in the firm in the opening week of April. Previously, VN Enterprises had bought stake worth Rs.28.4 crore in FY18, across a series of open market transactions. Post the latest acquisition of 1.4 lakh shares, VN Enterprises has a 6.95% stake in the firm. For the quarter ending March 2018, Agarwal had a 2.01% stake in his personal capacity.

Since the firm’s key focus is on engineered pumps and EPC contracts, the slowdown in the domestic and global economy, led to drying up of its order books, thereby impacting its growth and margins. The firm has a sizeable global presence, with manufacturing operations present across United Kingdom, Italy, France, Switzerland, South Africa, Zambia, Australia and Thailand, through its group companies. With the improving macro-economic scenario and rationalising of its loss-making subsidiaries, things are set to turn around for the firm.

Investor sentiment surrounding the stock also seems upbeat with the stock gaining 35.27% in the past one year, against 14.7% rise of the benchmark Nifty Small Cap 100 index. The firm has reported a tepid 1.09% increase in the bottom-line to Rs.14 crore, for 9MFY18 vis-a-vis 9MFY17. Its net sales reported a healthy growth of about 40% to Rs.250.21 crore for 9MFY18 vis-a-vis 9MFY17.

Over the past one year, the promoter’s stake in the firm has increased from 61.07% for the quarter-ending March 2017 to 66% for the quarter-ending March 2018. Domestic mutual funds on the other hand have sizeably pared down their stake in the firm from 17.24% FY17 to 10.58% in FY18. ICICI Prudential AMC has been paring down its stake in the firm over the past one year, from 4.29% in March 2017 to 3.41% in December 2017, with no mention thereafter. DSP Blackrock AMC also has reduced its stake in the firm from 2.42% in the quarter-ending March 2017 to 1.51% for quarter-ending June 2017,with no mention thereafter.

Reliance Capital’s stake in the firm has remained unchanged over the past one year, at 3.87%. Kotak Mahindra AMC marginally increased its stake in the firm from 3.25% to 3.28%. Foreign investment in the firm has also reduced from 1.12% for the quarter ending March 2017 to 0.06% for the quarter-ending March 2018. Eastspring Investments reduced its stake from 1.12% for the quarter-ending March 2017 to 1.07% for the quarter-ending June 2017 and finds no mention thereafter.

The firm is currently trading at an attractive 12.5x, on a one-year forward basis (FY20). The closure of the operations in its loss-making subsidiary based in UK, Mather Foundry, in the wake of subdued demand in the oil and gas segment is expected to reduce the stress in the balance sheet. This along with an expanding order book from irrigation and municipal water treatment segments is expected to drive growth for the firm, going forward.