Rakesh Jhunjhunwala is our favourite stock picker for obvious reasons. So we keep our ears close to the ground and our eyes peeled for any news relating to this great investor. Any buzz that the Badshah of Dalal Street is buying any shares for his investment portfolio sends us scampering to do more research to find out if he has discovered something in the share that we have missed.
Of course, mere rumor or even confirmed news that Rakesh Jhunjhunwala is buying a share should never be reason enough to buy the share. But it should provoke you to investigate more whether he has spotted something that you haven’t.
Rakesh Jhunjhunwala informed BSE that upto June 20, 2010, he and Persons Acting in concert were holding 12,68,000 shares of VIP Industries Ltd. On June 21, 2010, they acquired 375,000 shares of the Company, which takes their total shareholding to 16,43,000 shares, which is 5.8132% of the total issued and paid up capital of 2,82,63,463 shares.
About VIP Industries Limited
VIP Industries Limited manufactures luggage products and accessories in India and internationally. VIP Industries has a 60% market share in the organized market
VIP Industries’ FY10 Results (unaudited) (consolidated)
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VIP Industries’ Quaterly Results
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|---|---|---|---|
| (Rs cr) | Mar 2010 | Mar 2009 | YOY |
| Operating Income | 139.10 | 121.00 | 14.96 |
| Total Expenses | 119.90 | 118.30 | 1.35 |
| Operating Profit | 19.20 | 2.70 | 611.11 |
| Other Income | 0.20 | 5.80 | -96.55 |
| PBDIT | 19.40 | 8.50 | 128.24 |
| PBT | 14.00 | 0.70 | 1,900.00 |
| Adjusted Net Profit | 11.00 | 5.50 | 100.00 |
The Company reported sales of Rs. 669 crores which is an increase of 18.74% over last year’s sales of Rs. 563.40 crores. It reported an EBITA of Rs. 77.40 crores as against last year’s marginal profit of Rs. 3.2 crores. Its’ net profit was Rs. 48.3 crores after extraordinary items of Rs. 6.2 crores.
VIP Industries’ showed an Equity Employed of Rs. 144.10 crores (Rs. 28.30 crores equity + Rs. 116.10 crores of free reserves). The Net profit of Rs. 48.30 crores tranlates to a return of 33.52% of such Equity Employed.
Its’consolidated EPS was Rs. 17.1 after extraordinary items. At the CMP of Rs. 335, this leads to a PE of 190.60. At the EPS of Rs. 19.3 before extraordinary items, the PE is 17.35.
As soon as news came that Rakesh Jhunjhunwala has bought into the shares of VIP Industries, there was a 30% gain in just one week. VIP Industries’ share has quintupled (577%) in one year. Frankly, at its current PE, the stock is expensive compared to its peers given that Dilip G Piramal, its’ Chairman has suggested that the volume growth would be lower at 15% this year as compared to last year’s 25%.
In an interview with CNBC-TV18, Dilip G Piramal pointed out that while in 2010, VIP Industries had seen 25% volume growth in soft luggage, it would be 15% volume growth this year. He also said that the growth in hard luggage would be static.
He also said that VIP straddles the entire market and has nearly 60% market share in the organised market. In the organized sector, there was not too much of competition as there were just one or two other brands. VIP Industries has a very large market segment share. It has four strong brands, VIP, Aristocrat, Alpha and Skybags. The fifth one is Footloose which is quite small at the moment. It straddles virtually the entire market, except the exclusive at the very top end and is a mass premium brand.
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