Vishal Sood, managing director and partner at SAIF Partners, a private equity and venture capital firm, has nearly halved his fund’s stake in Blue Star by selling shares worth Rs 163 crore. Post the sale, SAIF India IV FII Holdings’ stake has reduced from 4.95% to 2.84%. SAIF has been holding Blue Star since June, 2012, when it purchased 950,000 shares for Rs. 16.77 crore. Back then, SAIF’s average buying price was Rs.175.
In the second week of this month, when SAIF sold, Blue Star traded at Rs.805, 5x the buying price. The stock has had a strong run over the past five years and is up 64% year-to-date. The quarterly disclosure for the past seven quarters shows that SAIF has cut its stake at various points to profit from the jump in price. As per the September 2017 disclosure, foreign institutional investors hold 10% and domestic funds hold about 19%.
Blue Star has rewarded investors’ faith with strong operating performance. Over the past four years, net profit has grown 33% CAGR. Blue Star operates in two business segments, viz. projects and cooling products. In the project business segment, Blue Star offers (mechanical, electrical and plumbing) services.
As on Q1FY18, the total order backlog stood at Rs.2,010 crore. The management expects its order book to grow between 20-25% in FY18. In the cooling products business, Blue Star offers room ACs and inverter ACs. In the intensively competitive room AC segment Blue Star has a market share of 11.5% and management wants to increase its market share to 12.5% by FY18.
Sood believes that the Blue Star management will deliver a cool return going forward; hence he hasn’t sold out entirely. If the capex cycle finally does pick up, Sood will end up laughing all the way to the bank.