When I learnt (in April 2015) that Dolly Khanna a.k.a. Rajiv Khanna had scooped up a massive chunk of 5,06,754 shares of Nandan Denim, I couldn’t resist asking the question whether the stock would also be a “dazzling multi-bagger” like the other stocks in her glittering portfolio of multi-baggers.
I was perfectly justified in my assessment because since that date, the stock is up a magnificent 107%. Dolly would obviously have pocketed more gains because her purchase price will be much lower.
Since then, I have been diligently reporting on the numerous research reports issued by Sunidhi Securities, IndiaNivesh and Nirmal Bang recommending a buy of Nandan Denim. Jagannadham Thunuguntla of Karvy is the latest to issue a buy recommendation with a target price of Rs. 158.
Today, the big news is that Polus Global Fund, a leading FII, has agreed to subscribe to 25 lakh fully convertible warrants of Nandan Denim for a total consideration of Rs. 50 crore. The warrants are to be converted into equity shares at Rs. 200 per share within a period of 18 months.
The best part is that the price fixed for conversion of the warrants is at a whopping 70% premium over the closing price of Rs. 115.50 of the stock on Friday, 18th September 2015 and 250% premium to the book value of Rs. 57 per share.
The other notable aspect is that Polus Global Fund is required to pay an amount of Rs. 12.50 crore upfront to receive an allotment of the warrants. If it chooses not to exercise the warrants on the appointed date, this sum will be forfeited by Nandan Denim.
The deal reflects the clear cut confidence of Polus Global Fund that the stock price of Nandan Denim will be at least, if not more than, Rs. 200 by the date for exercise of the warrants, 18 months from today. Otherwise, it would have never agreed to wager Rs. 12.50 crore for this purpose.
If you ponder over it, you will realize that Polus Global Fund’s confidence in Nandan Denim is not misplaced. We have earlier seen how all the savvy investors are making a bee-line for textile stocks. The theory amongst the savvy investors is that India has presently a minuscule portion of the global market for textiles and that it will soon be able to muscle into a larger share. Some of the stocks which are in great demand by the savvy investors include Welspun Syntex, KPR Mills, Ambika Cotton, Sutlej Textiles, Gokaldas Exports etc.
Nandan Denim, with its aggressive expansion plans and top-quality management, is well placed to take advantage of the growing demand for textiles from the domestic and the international market.
It is also notable that Polus Global Fund has itself tasted huge success with textile stocks. It bought a chunk of 200,000 shares of Sangam (India), which is engaged in manufacture of PV dyed yarn and other textile products, on 09.06.2015 at Rs. 129 per share. At the CMP of Rs. 268, Polus is sitting on a gain of more than 100% for just a couple of months’ work. Polus holds 885,000 shares in Sangam as of 30.06.2015 worth Rs. 23.71 crore.
On a YOY basis, Sangam is up 215%.
Polus Global Fund also holds 685,000 shares in Mandhana Industries worth Rs. 19 crore at the CMP of Rs. 278. This stock has not done as well as its peers in the Industry.
So, it does appear that Polus Global Fund knows what it is talking about when it promises to take Nandan Denim at a price of Rs. 200.
If Nandan Denim does reach the coveted target price of Rs. 200 in 18 months, we will have to compliment Dolly Khanna first and Polus Global Fund second!