A couple of days ago, I reported that Porinju Veliyath had raised a massive treasure chest of Rs. 220 crore for his PMS called ‘Equity Intelligence’. Porinju has been looking for opportunities to deploy the funds.
Today, Porinju launched an audacious raid on the IZMO/ Logix Microsystems counter. Before anyone could realize what was happening, he scooped up a massive chunk of 70,000 shares at Rs. 54.21 each. This sent the stock rocketing upto the circuit limit of 20%. It finally rested at Rs. 61.05.
Porinju already has a substantial holding in Izmo. As of 31st March, 2015, he held 150,000 shares. In addition to today’s purchase, he had bought 65000 shares on 11th June 2015 at Rs. 38.57 each. His total holding in Izmo now stands at 280,000 shares. The investment is worth Rs. 1.71 crore.
What Porinju sees in Izmo/Logix Microsystems is a big mystery. It is an ultra micro-cap with a market capitalisation of only Rs. 73 crore. It runs a website called “izmocars.com” and is supposed to be “The World Leader in Automotive Solutions” and offers “hi-tech Automotive e-retailing solutions in U.S.A, Mexico, Europe, and Asia”. It also has a website called “carazoo.com”/ “motortrend.in” where one can place classified advertisements to buy and sell cars.
On an earlier occasion, Porinju had revealed that his fascination with IZMO stems from the fact that Ratan Tata and other marquee investors like Hillhouse Capital, Tybourne Capital and Sequoia Capital have invested in “cardekho.com” at a valuation of Rs. 2000 crore. A recent investor in cardekho.com is the venerable HDFC Bank Ltd. This lends credibility to the valuations because HDFC Bank is supposed to be a sober and conservative investor unlike some of the venture capital funds.
So, if Izmo/Logix can get to even a tenth of cardekho.com’s valuation, it would become a mega multi-bagger appears to be Porinju’s calculation.
Porinju’s other theory appears to that when all the ecom companies like Infibeam, Flipkart, Snapdeal etc line up for an IPO, there will be great demand for listed stocks like Izmo.
Porinju may also have been inspired by the success of Intrasoft Technologies Ltd which runs an ecom website called 123stores.com and 123greetings.com. Intrasoft is up a mind-boggling 1028% in the past one year. In just the last month, the stock is up 75%.
So, my guess is that Porinju is not banking on the fundamentals of Izmo doing anything special. Instead, he is hoping that there will be a great hype about ecom companies in the foreseeable future and that he will be able to cash in on that mania.
How did he make a packet when he himself raised the stock price up and it is a micro cap so he will need to exit before he makes any money?
I think in these cases his horizon must be of 5-7 years where liquidity is not important in short term.
He might have bought these shares with private equity mindset. He might exit the stock if in future company tries to raise some capital.
Prima faciely I would say this is a valuation game.
how will he make money if he only keeps buying? who will he sell to? or is this just a market operation?
Actually Some retail investor follow these persons When they buy afterwards small retal investor purchases. And these company have less equity base. So numers of share in markest is less. & the share rise without change in any fundamentals or earning . There are some examples where retail investors in huge loss. So please be careful & take exposure in those share where equit base is high(or liquidity is high). Otherwise you may locked in.
you are absolutely right. these are basically market operators in low volume stocks where they float the story and use the media to promote stocks. Then they exit as everyone starts buying.
What are the examples
Has any serious investor studied Izmo Balance Sheet before committing funds ?
be careful when small investors invest on these stocks. Ex: few months back Porinju said that he is buying DLF @100 which is a value buy. Then it went up to 155. After a couple of months DLF price came back to 110 and he was asked does he hold DLF? he said No he sold at 150. Is this to be believed? Is he a trader or Investor? So pl be careful.
Book Value of Izmo is 134. It is a true value stock.
Book value of Rpower 70, (cmp – 45), Book value of sumeet ind 35 (Cmp12 , PE -3).
Main Thing is earning Please tellme about PE of this IZMO
There is no need of E for E com stocks. Do you have any PE for Flipkart or Snapdeal? Even in next few years they may not have. Look at the valuations and all top funds have investments. This story is developing like IT boom earlier. Some will make a lot of money and others will go bankrupt. Serious players only will survive after the dust settles.