Yeh Andar Ki Baat Hai

“Yeh andar ki baat hai,” the famous tagline has been synonymous with Lux Industries’ innerwear and leisure products — the tagline has helped build strong brand recall. But what happens when ‘andar ki baat’ is not too palatable? Evidently, promoter selling in the stock has ruffled quite a few feathers. Promoters including Ashok Kumar Todi sold 4.2% worth Rs.1.38 billion in the last week of December.

After the chunk was offloaded, promoter holding has dropped from 72.04% to 67.84%. Part of the shares being sold was warehoused by Royal Bank Of Scotland for Jupiter India Fund, which bought shares worth Rs.591 million. Other prominent stocks which the fund holds include Godfrey Philips, Biocon, Fortis Healthcare and Max Financial. On the same day, two other promoter-related entities also traded Lux Industries’ stock. M Prasad & Co bought shares worth Rs.178 million and offloaded shares worth Rs.149 million. Similarly, Setu Securities acquired shares worth Rs.176 million and sold shares worth Rs.100 million.

To quell investor jitters, the company issued a clarification stating that the stake sale was a part of strategic disinvestment process undertaken by the promoters. “The sale would advance the progress of proposed scheme of amalgamation providing merger of JM Hosiery & Ebell Fashions with Lux Industries,” said its filing. Amidst all this activity, the stock dropped drastically closing down 10%, at Rs.1,302.

The stock had rebounded from its 52-week low of Rs.983 in August as the company registered strong revenue growth in Q2FY20. “With 27% year-on-year revenue growth, Lux outshone the industry, while Page and Rupa, each, reported growth of 12%. Dollar’s revenue was flat,” stated analysts at Anand Rathi Securities in a report date November 26. The sharp increase in topline can be attributed to winter sales. But ebitda margin was flat, dropping 15 basis points to 15.1% due to increase in other expenses and subdued gross margin growth. 

With the consumption slowdown looming over the sector, foreign investors have turned cautious. They had reduced their stake from 1.65% in March 2019 to 1.45% in September 2019. However, the sole mutual fund in the stock has taken advantage of correction to increase its holdings. Over the past two quarters, Kotak Mutual Fund has increased its stake from 1.90% to 2.63%. Given that bulk of the promoter block was offloaded around Rs.1302, institutional selling around the 1,400 level could well have pushed down the stock.