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.