Overwhelming green

Pigment manufacturer Sudarshan Chemical’s promoters sell shares worth ₹841 million 

Sudarshan Chemical is right on track to become the third largest pigment manufacturer globally. The company’s Q2FY21 performance managed to match the pre-COVID level, with revenue coming in at Rs.4.31 billion compared to Rs.4.26 billion in the year-ago period. While the company’s net profit slid 34% from Rs.462.1 million to Rs.303.3 million over the same period, it was up 60% compared with Rs.181.9 million recorded in Q1FY21. In the Q2FY21 earnings call, CFO Nilkanth Natu mentioned that the domestic business is up 70% as compared to the previous quarter.

The stock price, too, has recovered from the March low of Rs.286, and currently trades at Rs.486. Cashing in on the uptrend, promoter entity NJR Finance, offloaded its entire holding of 1.58% worth Rs.504 million. The holding company has non-executive director Anuj Rathi on its board, who personally holds 7.87%. Promoter Archana Anuj Rathi also sold her entire holding of 1.05% worth Rs.337 million. After the sale, overall promoter holding now stands at 40.03%.

With Clariant and BASF, two largest global pigment manufacturers, divesting their pigment businesses, Sudarshan Chemical is well positioned to claim the No.3 spot globally, feel analysts at HDFC Institutional Research. Boasting market share of 35% in India, the company is “leaping into the league of giants”, mentions their report. Their analysts have a ‘buy’ rating with target price of Rs.550.

Betting on its regular capacity addition and strong brand equity, analysts at Anand Rathi Group also have a ‘buy' rating with target price of Rs.585. The confidence comes from management’s upbeat commentary during the Q2FY21 earnings call. CFO Natu mentioned the company is hopeful of strong Q3 performance due to pent-up demand. The company also plans to launch yellow pigment and work on backward integration to reduce dependence of raw materials from China.

Fidelity Pacific Fund seems to have bought into the growth story as it purchased 568,924 shares of the 1.8 million offloaded by NJR Finance and Archana Rathi  Earlier, in August, ICICI Prudential MF also picked up 950,000 shares from Rohit Kishor Rathi at Rs.430/share. Between June 2020 and September 2020, mutual funds have increased their stake from 2.46% to 3.70%, while FIIs have marginally reduced their holding from 8.33% to 8.13%. Prominent big-ticket shareholders as per the September 2020 holding include Amansa Capital (3.15%), Akash Bhanshali (6.44%) and Vijay Kedia (1.59%).