Markets

Singapore-based funds increase stake in Shankara Building; stock up

Our Bureau | | Updated on: Dec 05, 2018

Analysts remain cautious on margin concerns

Shares of Shankara Building Products recovered strongly on Wednesday, thanks to buying by Singapore-based funds. The stock’s decline got aggravated last week after the company gave a cautious outlook in the face of heightened competition.

The stock plunged to ₹542.10 on the BSE on Wednesday, but recovered to close at ₹579.6. Intraday, it had registered a high of ₹607, while its 52-week high price was ₹2,365. However, analysts are still cautious on the stock and the company’s performance in the near term.

In a disclosure to the stock exchanges on Tuesday, Shankara Building said Flowering Tree Investment Management Ptd Ltd, Ashoke Pte Ltd and Arjuna Fund Pte Ltd have hiked their stake in the firm to 5.03 per cent from 4.88 per cent through open market purchases on November 29. Ashoka Pte and Arjune Fund Pte are part of Flowering Tree Investment Management.

Crashes 47% in a month

On Wednesday, Shankara Building said that Amansa Holding Pvt Ltd, part of Amansa Capital Pte Ltd, increased its stake from 6.24 per cent to 7.52 per cent through a preferential allotment.

Shares of the company, whose IPO was priced at ₹460, have been losing value in the last one year on stiff valuation. In the last one month, the stock has crashed 47 per cent, and in the last one week, 13.6 per cent. The stock, which got listed in April 2017, had plummeted 74.5 per cent in the last one year.

Shankara Building in its conference call last week had updated on the business strategy of achieving higher revenue growth in retail segment but at much lower margins. The company expects its earnings before interest, tax, depreciation and amortisation margin for the financial year 2019 to be in the range of 4.5-5 per cent against 6.9 per cent it earned in the previous year.

Key concerns

IDFC Capital, which downgraded the stock to ‘underperform’ with a price target of ₹525, said: “While we appreciate the intent of the revised strategy, the steps also point to two key concerns — competitive intensity which is high despite having scale and brand equity; and revenue growth benefit appears to be lower compared to the cost involved in terms of margin trade-off, thereby impacting the overall profitability.”

According to Kotak Securities, the change in business strategy is likely to result in significant earnings reduction and the positive impact of these changes is likely to be reflected after two to threee quarters.

“We downgrade the stock to ‘sell’ from ‘buy’ earlier, Kotak Securities said.

Published on December 05, 2018
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