First, we have to sympathize with Ashish Dhawan, the whiz-kid co-founder of ChrysCapital. He held a massive truckload of Tech stocks like Mastex, Sasken, Logix Micro/ Izmo Advance Metering Technology, Megasoft, Allsec Technologies, Take Solutions, Cyber Media, Palred Technologies, NIIT Technologies etc patiently for several years. However, for one reason or the other, the stocks did not take off, causing immense frustration to the ace stock picker. In a fit of despair, Ashish Dhawan dumped several of his holdings in the Tech stocks, which included 25,07,116 shares of Mastek Ltd (holding as of 30.09.2013).
The timing of the sale was most inauspicious because Mastek’s fortunes were right in the cusp of a massive turnaround.
How Daljeet Kohli was able to sense that the turnaround was coming is a big mystery. Did he have insider knowledge or was it pure good luck?
Anyway, Daljeet made the prophetic prediction in July 2014, when Mastek was languishing at Rs. 190, that there would be “value unlocking” by way of ‘Divestment/Listing of U.S. Insurance Business separately’ and that investors should grab the stock.
What happened thereafter is history. Mastek spun off the offshore insurance business into another company called Majesco. Each shareholder of Mastek got one share of Majesco for every share of Mastek held by him.
Even after the news was officially announced, Daljeet implored investors to buy the stock with the promise that mega bucks are in store.
Today, Mastek quotes at Rs. 172 while Majesco quotes at Rs. 509, leading to a combined valuation of Rs. 681. This means that if you had acted on Daljeet’s advice and bought Mastek in July 2014 at Rs. 190, you would be richer by 258% in just 15 months.
This also means that Ashish Dhawan lost out on gains of Rs. 123 crore on his massive holding of 25,07,116 shares.
Now, the important part is that Daljeet is still gung ho about Majesco’s prospects. In his latest interview, Daljeet advised:
“In fact this has been a best-performing stock. We started Mastek as combined entity at Rs 140 and it has given us phenomenal returns. You can see what number the separate companies are giving you; it is Rs 800. We have actually recommended Majesco as our Diwali pick for next one year. We believe that the basic fundamental i.e. company’s insurance vertical in US is doing well. There is a scope that the gap between its nearest peer Guidewire that trades at nine times of EV to sale and Majesco which was trading at around 2.5 times will fall. We believe that as company scales up – it has already taken over two companies – this gap will narrow down. So therefore, we had given an initial target of Rs 549 and then of course in a longer term, it can go beyond Rs 800-900-odd levels.”
If you are looking for similar turnaround stories, you can consider Transport Corporation of India (TCI). TCI has proposed a demerger of its Xpress division. According to leading experts, this move will also result in “value unlocking”.