In January 2014, when the entire economy was in the doldrums, logistics stocks were going a-begging. At that time, when Radhakishan Damani’s investment firms, Brightstar Investments and Derive Investments, bought huge truckloads of Gati and Transport Corp, I asked the pertinent question “Why Did Radhakishan Damani Buy Gati & Transport Corp Stock And Does It Signal End of Woes For Infra/ Cap Goods Sector?”
Since then, both stocks, as well as the entire logistics sector, have been on fire and investors have reaped huge multi-bagger gains.
Today, we can ask the same question about India Cements and the entire cement sector. Does Radhakishan Damani’s interest in the stock signal the beginning of good times for the cement sector?
Radhakishan Damani’s investment arm, Derive Investments, bought 20,71,580 shares of India Cements yesterday at Rs. 86.61 each. The investment in the stock is about Rs. 18 crore.
India Cements is run by N Srinivasan, the strongman behind the BCCI and Chennai Super Kings (CSK), the IPL franchisee. N Srinivasan is more in the news for his cricket controversies than for his business deeds.
(Image credit: BS)
Prima facie, Radhakishan Damani appears to have been attracted to India Cements for four reasons:
(i) India Cements reported good results in Q4FY15 with the net profit surging to Rs. 36.6 crore as against a loss of Rs. 157 crore on a YOY basis. The EBITDA was also higher at Rs. 200 crore as compared to Rs. 119 crore on a YOY basis;
(ii) There is likely to be increased demand for cement in the south, led by growth in Andhra Pradesh and Telangana. The company disclosed that the Andhra Pradesh government alone had enquired for nearly two million tonnes of cement for housing and irrigation works. India Cements has around 7.3 million tonne capacity in Andhra Pradesh and Telangana combined;
(iii) The Union Cabinet approved a few days ago the “low-cost housing scheme with interest subvention” intended to provided housing for all by 2022;
(iv) Cement prices are expected to remain buoyant owing to increased spending on housing in rural and semi-urban areas and an improvement in orders for infrastructure projects.
Interestingly, India Cements is an old favourite of Radhakishan Damani. On 25th July 2013, Derive Investments had bought 19.50 lakh shares of India Cements at Rs. 53 each. The present holding of Derive Investments in India Cements is not known.
Now, we have to wait and watch whether India Cements will go the same path as TCI and Gati and fill Radhakishan Damani’s coffers with riches.