A market leader in the dinner ware segment with strong brand recall and distribution network — La Opala — too has fallen prey to rapidly deteriorating consumer sentiment. In Q1fy20, the impact of weak discretionary spending was clearly visible on the company’s sales and operating profitability. While sales grew dismal 5% to 580 million, Ebitda was flat at 240 million. Even in Q4fy19, the signs of an impending slowdown were flashing. Now, the pressure is clearly reflecting in the stock price, which is down 40% over the past year. In a bargain hunting move, promoter entity Genesis Exports, in which Sushil Jhunjhunwala is one of the directors, bought shares worth 51 million earlier in August, just as the stock hurtled to a 52-week low. Overall in 2019, the promoters have acquired shares worth 102 million. As of June 2019, total promoter stake stood at 65.33% compared to 65.02% at the end of December 2018. After the latest acquisition, Genesis Exports’ holding has risen from 45.99% to 46.31%.
Bargain hunting by the promoter might not be enough to revive investor sentiment as the company’s performance is expected to be marred by drop in consumer spending. “We have cut multiples due to weakness in consumer sentiment and delay in commencement of new plant,” states an Elara Capital report. The company’s fy20 sales and net profit are expected to fall by 4% and 0.3%, respectively.
Analysts’ caution seems to be rubbing off on institutional investors as well. Foreign portfolio investors have taken cognisance of La Opala’s weak financial performance and reduced their stake from 13.31% in December 2018 to 11.86% in June 2019. Steadview Capital Mauritius, which had 1.17% stake, seems to have either sold off its holding or reduced it below 1%. Some India old-timers have kept the faith if the June holding is anything to go by. Matthews India Fund has kept its stake unchanged at 4.41%. Mutual funds, too, have increased their holding from 5.47% to 6.70% during the same period. uti mf and dsp mf have increased their stake from 3.37% and 2.04% to 3.66% and 2.62%, respectively.