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IR consultant a cause of fall in CEBBCO price?

Posted by fairval on February 7, 2013

As they say; you should choose well who you sleep with. In CEBBCO’s case, the IR consultant or the management – one of them, must have thought about this in the last few days. It emerges the IR consultant may have been a key player in the share price fall.

Shares of Commercial Engineers and Body Builders (CEBBCO) have plunged dramatically in the last few days, down 50%. Given that the company financials appear to be healthy D/E<0.5, no shares pledged), this was surprising. A couple of broker reports in Nov/Dec etc had price targets > Rs 140, when share price was around Rs 100. Now the price is < Rs 50.

So what happened? Yesterday a story in The Economic Times gives some reasons. It says  the 20% fall on Friday was triggered by an HNI who sold to fund margins on another stock.In ET’s own words:

The fall created panic among other shareholders who sold huge quantities on Monday. India Max Investment Fund and Aditya Birla Finance sold 4.19 lakh shares and 3.25 lakh shares, respectively. The other big seller was Prashant Desai, a former employee of Seagull Value Consultancy, who offloaded 7.33 lakh shares. Meanwhile, India Max Investment Fund sold another 15 lakh shares on Tuesday.

Prashant must be the owner of Seagull, who reported has joined MCX to head its IR. But the size of his sale raises some questions (we dont know if the ET story is correct tho):

  • Why did he sell at this price, unless there is something shady in CEBBCO? He should know the company better than anyone, unless he was the HNI who reported was forced to sell to fund a margin call.
  • 7.3 lakh shares is close to Rs 4 crore at time he sold. We don’t know what price he bought. That is a large amount in one stock, unless your equity portfolio is something like 40-50 crore (>10% in one stock is rare, unless u are a true follower of Buffett)

Any which way, whatever has happened isn’t good for CEBBCO. Management has denied there is any financial issue at the company. Tata Capital, which owns 11% for a long time, has not sold. Tata Motors accounts for almost half of CEBBCO’s revenue, so Tata Capital being there is a comfort.

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2 Responses to “IR consultant a cause of fall in CEBBCO price?”

  1. So is it right to say it is a case where huge expectations were built by IR and analyst community [so called structural growth story lead by increasing penetration of FBV rather than any corporate governance issues…

    • fairval said

      I dont know really if the growth story is incorrect or magnified. On paper, it sounds good. The differential duty in favour of FBVs can be a good structural driver. Also, Tata Capital holds 11%, and they continue to remain invested. Tata Motors is the biggest customer, accounts for about half of cEBBCO’s business. So Tata Cap being there, is some comfort.
      So there is more to this than meets the eye, like some corporate governance issue which is not apparent currently

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