Still Counting

Astec LifeSciences, the manufacturer of agro chemicals and pharmaceutical intermediates, has been on a roll. Over the past one year, the stock has gained over a whopping 58.66% against the benchmark Sensex’s gain of 14.8%. The stock has been buzzing after the unlisted Godrej Agrovet acquired a controlling stake (45.29%) in the firm in FY16 for close to Rs.213 crore at Rs.190 a share. The promoter entity currently holds 55.72% in the firm. In FY17, the promoter group, including Godrej Agrovet, further increased its stake from 63.64% in FY16 to 65.54% in FY17. The buying spree has continued in the current fiscal. Between February 6 and June 30, Godrej Agrovet bought over 5.27 lakh shares at Rs.587 a share, on an average, for over Rs.30.94 crore. 

Astec’s fortunes too have turned around. It rallied from making a meagre profit of Rs.0.36 crore in FY16 to reporting a PAT of over Rs.19 crore in FY17. Revenue in FY17 too grew 27%, to Rs.313 crore. The management reckoned that improvement in plant utilisation and de-bottlenecking contributed to the better performance of the firm in FY17. However, the discernible increase in the trade receivables in FY17, vis-à-vis FY16 remains a matter of concern. The receivables have increased from Rs.81 crore in FY16 to Rs.111 crore.

In the case of Agrovet, the company’s largest source of revenue is the animal feed business, which accounts for over 50% of its revenue. Its other businesses include agri-inputs, oil palm manufacturing, dairy and poultry. The view on the Street is that Agrovet may go for a reverse merger with Astec in a bid to unlock value. Not surprising that investor appetite around the stock has been rising. Currently, FIIs have 1.87% stake in the firm, with LGOF Global Opportunities holding a chunk of FII stake of 1.58%. Among non-institutional holdings, Kedia Securities holds 1.03% stake, while Own Leasing and Finance’s stake has declined marginally from 1.24% to 1.21%.