Rakesh Jhunjhunwala‘s purchases of shares for his investment portfolio attracts the attention of every investor. And rightly so because India’s greatest investor has an uncanny knack of investing in shares that appear to be languishing but are in reality multi-baggers in the making.
Rakesh Jhunjhunwala is buying shares of Visaka Industries! This is now official. The official bulk deal data for Visaka Industries shows that on 22nd April 2010, Rare Enterprises, his investment firm, bought 1,00,000 shares of Visaka Industries at Rs. 151.75 per share. His total investment in Visaka Industries is Rs. 1,51,75,000.
So, what does the legend see in Visaka Industries? We’ve analyzed Rakesh Jhunjhunwala‘s investment techniques in great detail and what we’ve found is that the master prefers shares that are out of favour in the present but which possess great potential. Some of his stellar picks like Shipping Corporation of India, Bharat Electronics, Karur Vyasa Bank, Praj Industries and Titan Industries come to mind. All these were companies whom investors never cared to give a second glance because each of one had some problem or the other. But his discerning eye what the other investors could not see. And the rest is history!
Well, we’ve already put Visaka Industries through the grinder on the occasion of its Q1 FY 2011 results (See Visaka Industries: Poor Q1 FY 2011 results but holds promise!). Visaka Industries‘ results were not that great and the share price of Visaka Industries plumetted 14% in one month.
Visaka Industries‘ YOY sales were down to Rs. 185 cr from Rs. 189 crores. Visaka Industries‘ EDITA was down to Rs. 32.35 cr from Rs. 39.34 cr while the Net Profit after tax was down to Rs. 20.70 cr from Rs. 25.84 cr. Visaka Industries‘ Diluted EPS was down to Rs. 13.03 from Rs. 16.28.
What must have caught Rakesh Jhunjhunwala‘s discerning eye is the fact that Visaka Industries has grown steadily at a 3 year CAGR sales of 13%. Visaka Industries‘ 3 year CAGR Profit grew at 35%. He must have also liked the fact that Visaka Industries has a manageable Debt to Equity Ratio of 0.78 and offers a Return on Equity of 27%.
Rakesh Jhunjhunwala must have also drawn a lot of comfort from the fact that Visaka Industries‘ Book Value of Rs. 148 is high in comparision to its CMP of Rs. 154. Visaka Industries‘ low PE of 4.5 and attarctive dividend yield of 3.1% must have also soothed his nerves.
Rakesh Jhunjhunwala always emphasizes that one must look for scalability in operations. A great performing small-cap must become a great performing mid-cap if you want a multi-bagger he says.
From that perspective, he must have surely been greatly enthused by the fact that Visaka Industries is involved in the production of cement and asbestos sheets for which there is a market with huge growing demand from the rural and semi-urban masses of this great country. Visaka Industries is a market leader in its field. Visaka Industries is the second largest cement sheet manufacturer in India with the total installed capacity of 6,30,000 tonnes. Visaka Industries is diversified and also engaged in the manufacture of fibre cement products and synthetic blended yarn. Visaka Industries has a presence across India with 6 manufacturing plant for asbestos making plants and two for manufacturing garments.
So we do have to compliment Rakesh Jhunjhunwala on his choice of stock for investment. Visaka Industries‘ consistent growth rate, high book value, low PE, good dividend yield and a growing demand for its products does make it an ideal investment. Whether Visaka Industries will also become a multi-bagger like Rakesh Jhunjhunwala‘s other famous multi-baggers remains to be seen.