On 17th June 2014, when Ricoh India made the grim announcement that the delisting offer had failed, the punters were left wringing their hands in despair as the stock price plunged 50%, tripping several successive lower circuits.
However, one man was standing on the sidelines and rubbing his hands with glee. When the carnage subsided and the dejected punters had gone home, that man, Kenneth Andrade, whiz-kid with IDFC Mutual Fund, quietly walked up to the counter and picked up a massive chunk of 425,285 shares of Ricoh.
Kenneth Andrade has a stellar reputation as a picker of winning stocks. He is fondly called the “Mid-cap Mogul” for his fascination with mid-cap stocks and the success he has had with them.
Kenneth Andrade manages a number of funds like IDFC Premier Equity, IDFC Equity Fund and IDFC Equity Opportunities Fund. All three have put in a spectacular YOY performance of about 55% + gains.
One look at the portfolios of these funds will tell you why Kenneth Andrade is so highly regarded. Kenneth was the early spotter of the opportunity in stellar winning stocks like Page Industries, Kaveri Seeds, Blue Dart, Bata India, HDFC Bank, ITC etc.
That is why Kenneth Andrade’s latest stock pick, Ricoh India, is significant.
What is even more significant is that Ramesh Damani, one of the most astute investors on Dalal Street, has also recommended Ricoh India as an investment opportunity.
To understand why such savvy investors are flocking to Ricoh, we have to turn to the brilliant analysis by Sushil Finance.
Sushil points out that Ricoh India is “growing by leaps and bounds” with an excellent CAGR revenue growth of 52% between FY11 – 14. This stupendous growth is achieved on the back of two pronged strategies of (1) Expanding product portfolio in the core business and (2) Venturing into IT services. Sushil also points out that while Ricoh has achieved its target turnover of Rs. 10bn in FY14, the new ambitious target is Rs. 30bn sales by FY17. Ricoh should be able to grow its Revenue by 35% CAGR for FY14-16E, Sushil adds. In the past, Ricoh’s margins have got crunched owing to the steep INR-USD depreciation. However, that will change now with the management’s thrust on higher productivity, better working capital management, reduction in fixed expenses and further streamlining of processes, Sushil explains.
On the valuations front, Sushil emphasizes that Ricoh is “going cheap” with market cap to sales of just 0.64x on trailing basis. The P/E of 9x FY16E earnings is attractive, Sushil says, when you bear in mind Ricoh’s status as a growth oriented MNC with very high standards of products and services, strong parent pedigree, enviable track record of revenue growth coupled with possibility of margin expansions.
Of course, the one unsaid factor is that Ricoh India may attempt a delisting for a third time, sending the punters into a frenzy one again. If that happens, it would be a good occasion for Ramesh Damani and Kenneth Andrade to cash in on their gains from the stock.