Centrum Capital, the diversified financial services company, has had good run on the bourses gaining about 136% in CY17 to Rs.72.60, and in early January the stock rallied further to Rs.77 on the news that promoter entity BG Advisory Services will subscribe to convertible warrants on a preferential basis up to a maximum of Rs.300 crore, besides raising an additional Rs.750 crore through a rights issue.
But the meltdown in the BSE Small Cap Index subsequently saw the stock come off 30% to Rs.59 against a 14% fall in the index. The slide was also in part accentuated by a 9% fall in net profit to Rs.416 million in FY18 even though revenue were up 44% to Rs.98.83 billion.
In April, the company gained considerable attention from investors when it sold its forex arm, Centrum Direct (CDL), to an Atlanta-based company Ebix Inc for Rs.12 billion. In 2017, Centrum had divested 18.5% of its stake in the leading money exchange player to a group of PE investors — Jacob Ballas, New York Life and Evolvence.
The financial services company has diverse verticals such as investment banking, wealth management, portfolio management, stock broking, foreign exchange, travel, lending, infrastructure and real estate advisory services. The sale proceeds, according to the management, will give the group a significant resource base to strengthen its core businesses.
Interestingly, BG Advisory Services has been on a buying streak from the starting of the month, from June 5 to June 20, during which it bought 1.58 million shares worth Rs.64.7 million. The last open market purchase saw 380,000 shares worth Rs.20.6 million being purchased at Rs.54.1 a share. Post the transaction, the holding of BG Advisory has increased to 0.34%. While the overall promoter holding stood at 37%, nearly half of the stake has been pledged.
Though the stock has corrected, valuations appear expensive given at 76x trailing 12-month basis. Though the recent open market acquisition indicates that the management is bullish about the future prospects, whether it will go ahead with the warrant and rights issues remains to be seen.