Ex-fav stock of Brahmal Vasudevan
Brahmal Vasudevan, the whiz-kid founder of Creador Capital, was amongst the first to recognize the potential of ADF Foods. He bought a truckload of the stock as far back as on 15th June 2011. However, for some reason, he got disillusioned and dumped his entire holding in a huff on 16th July 2014.
This was a tactical error because the stock has been on a vertical trajectory since then and has notched up impressive gains of 110%.
Purchase by Lashit Sanghvi & Ashwin Kedia of Alchemy Capital
Lashit Sanghvi & Ashwin Kedia of Alchemy Capital are known to be savvy investors in their own right with several multibagger stock picks to their credit.
Lashit Sanghvi bought a chunk of 300,000 shares of ADF Foods on 12th June 2014 at the throwaway price of Rs. 48.20 and has been holding on to the stock tight. As of 30th September 2016, his holding stands at 283,750 shares.
Ashwin Kedia, Lashit Sanghvi’s business partner at Alchemy Capital, holds 250,000 shares of ADF Foods as at 30th September 2016.
Purchase by Mrs. Nirmal Arora
We are not familiar with Mrs. Nirmal Arora’s profile though she is obviously a big-ticket investor given that she holds a treasure trove of 8,00,000 shares of ADF Foods constituting 3.64% of the capital.
Nirmal Arora bought her holding on 31st March 2016.
Dolly Khanna is gung-ho and has increased her holding
Dolly Khanna has been indulging in stealth buying of ADF Foods’ stock. She held 80,316 shares as of 1st April 2015. She increased her holding to 1,01,635 shares as of 31st March 2016. As of 30th September 2016 Dolly has more than doubled her holding to 217,981 shares.
Dolly’s conduct is in compliance with her trademark modus operandi. She typically buys a small chunk of the stock and increases her holding depending on her confidence level in the functioning of the Company.
The fact that Dolly Khanna has more than doubled her holding in the period from April 2016 to September 2016 sends a clear signal that she is gung-ho about the prospects of ADF Foods.
Porinju Veliyath storms in to cash in on mania for packaged foods
Porinju Veliyath bought a chunk of 125,000 shares of ADF Foods on 28th July 2016.
It is notable that a few days before buying ADF Foods, Porinju had bought a chunk of 72,000 shares of Flex Foods.
This implies that Porinju is gung-ho about the packaged foods business. Porinju has increased his holding in Flex Foods to 125,000 shares as of 30th September 2016. His present holding in ADF Foods is not known.
Business with huge scalability
The question as to why the savvy investors are making a beeline for ADF Foods is not difficult to understand.
The Company is engaged in manufacture of meal accompaniments like pickles, pastes, chutneys, ready-to-eat curries, canned vegetables, spices, frozen snacks,
ADF Foods sells its products under the brand names “Ashoka” and “Soul”, which are established brands. It also has strong distribution networks in Europe, USA, Middle East Countries, Australia, Canada and Asia, apart from India.
|ADF FOODS LTD – KEY FUNDAMENTALS|
|MARKET CAP||(Rs CR)||276|
|EPS – TTM||(Rs)||[*C]||3.86|
|LATEST DIVIDEND DATE||21 SEP 2015|
|BOOK VALUE / SHARE||(Rs)||[*C]||73.34|
[*C] Consolidated [*S] Standalone
|ADF FOODS LTD – FINANCIAL RESULTS|
|PARTICULARS (Rs CR)||JUN 2016||JUN 2015||% CHG|
(Source: Business Standard)
Buyback of shares implies stock is undervalued
Adf Foods has announced a buyback of its equity shares at a price not exceeding Rs. 125 per share for an aggregate amount not exceeding Rs. 18 crore.
Pursuant to this, the Company bought a chunk of 1,22,083 shares on 10th August 2016 at Rs. 117.19 per share.
According to experts, a buyback announcement implies that the management regards the stock price as being undervalued having regard to the prospects of the Company.
Siddharth Oberoi, the founder of Prudent Equity, a stock advisory firm, opined that a buyback reflects the management’s confidence in the fundamentals and financial stability of the organisation and is also important for long-term value creation.
Promoters increase holding with target of 60% stake
The holding of the promoters (the Thakkar family) in ADF Foods has been inching up probably aided by the buy-back of the stock.
As of 30th September 2015, the promoters held 52.35% of the equity. This increased to 54.04% as of 30th September 2016. As of 14th October 2016, the holding of the promoters stands at 54.32%.
On an earlier occasion, the promoters had indicated that they intend to increase the holding in ADF Foods to 60%.
Turnaround in USA operations
The operations of ADF Foods in the USA are loss making and have been a drag on the financials. However, the management has assured that the USA operations are on the verge of a turnaround.
If the much awaited turnaround does happen and the USA operations also start contributing to the profitability, the stock will surge on a vertical trajectory.
Ready-to-eat foods is the next big trend?
In his interview embedded above, Lashit Sanghvi opined that big money is made when investors identify the correct trend, build a sizeable position and wait for the trend to come true.
The same view was expressed by Nikhil Vora of Sixth Sense Ventures. He was also earlier an investor in ADF Foods. He also opined that such trends need to be identified when they are in their infancy and investors should hold on tight to the leaders in the trend.
The fact that ready-made foods is a successful business venture is provided by the success of all companies in the sector such as DFM Foods, Tasty Bite, Flex Foods, Lakshmi Energy Foods and also ADF Foods. However, the extent of scalability of the business is so immense in a Country like ours that these companies may have still only scratched the tip of the iceberg.
The unanimous bullishness of Dolly Khanna, Porinju Veliyath and Lashit Sanghvi, coupled with the buyback offer and the hike in promoters’ stake is sending the clear signal that good things are cooking at ADF Foods and that investors have to prepare themselves for a feast!