Fertile reward

Cartica Capital reaps a 30% gain by part selling its stake in PI Industries

Teresa Barger co-founded Cartica Capital, recently sold 3.7 million shares of PI Industries in two tranches. In the first tranche, the concentrated emerging markets investor sold 2.93 million shares and in the second bulk deal, around 780,000 shares. The average selling price of Rs.775 a share is about 30% higher than Cartica’s entry price of Rs.605 in June 2015. Post the transaction, Cartica’s holding is down from 5.68% to 2.93%. Apart from Cartica, the other prominent institutional investors in PI include ICICI Prudential MF and SBI MF with 6.16% and 3.73% respectively.

The Washington-based Cartica has $3.2 billion under management with a third of that invested in India. With the run-up in valuation, Cartica has been pruning its holdings and besides PI, the other companies in its India portfolio include Page Industries, Marico, Shree Cement, TVS Motor, RBL Bank etc. In Page, it is the second-biggest institutional investor with a 7.3% stake after Pulak Prasad’s Nalanda Capital which holds 9.96%.

Barger’s rationale for investing in PI Industries in June 2015 was that it had great management and the government’s attempts to improve agriculture productivity would benefit the agrochemical company. The stake dilution has come at a time when PI Industries is facing a slowdown in its CSM (custom synthesis and manufacturing) business where PI Industries provides product development services to innovator companies subject to a manufacturing commitment.

In 2QFY18, PI Industries’ topline grew 3.1% YoY (1.4% QoQ) to Rs.561 crore, which was below analysts’ estimates of Rs.600 crore. Profit was down 20% to Rs.80 crore. The CSM business de-grew 4% YoY to Rs.300 crore due to weak global demand and gross margin contracted by 150 basis points YoY to 48% due to weakening product mix, tilted in favour of less profitable products. Meanwhile, the domestic business bucked the trend as revenue grew 13% YoY, driven by re-stocking post GST and launch of new products.