Safir Anand, renowned value investor and one of the existing shareholders of the company, added more shares of the firm to his portfolio after seeing the numbers.
On Friday, the stock was stuck at 10 per cent upper circuit limit at Rs 519 with a market-cap of Rs 559 crore, nearly five-fold jump in just seven months. In fact, the stock has grown over eight times in the last one year.
RACL Geartech counts marquee names like MW Motorrad, Kubota Corporation, KTM AG, Schneider Electric, Piaggio, Yamaha India, SML Isuzu and among its customers.
“They have been delivering good monthly sales numbers. Their technology is good. They have made a breakthrough into the biggest brands. The numbers have been very good,” Anand told ETMarkets.com in a telephone interview.
The company has performed extremely well in recent quarters. March quarter revenues jumped to Rs 67 crore from Rs 47 crore YoY, while profit more than doubled to Rs 7 crore. For FY21, revenue stood at Rs 207 crore, down marginally from Rs 213 crore reported for FY20, but profit increased to Rs 23 crore from Rs 17 crore.
Problems with IPOs
While the veteran investor watches the smallcap space keenly, he is not a big fan of initial public offerings (IPOs).
Reason? The size of investment is limited during primary market offerings. That said, Anand admits he is not averse to buying new businesses post listing, if the situation looks right.
“I am not an IPO investor. If I invest, I get some token investment in the allotment and there is no point. Then the listing happens at a high premium and you can’t even average up. Sometimes there is just euphoria, because people take loans to apply for it,” he said.
That said, Anand thinks a couple of good IPOs have come and gone. “Krishna Institute of Medical Sciences was a good issue. One could have bought it as euphoria was missing at the listing. In fact, I myself bought it,” he said.
Commencing on Zomato IPO, Anand said he finds it a good business and right technology wise. “If the IPO is successful, it can have a cascading effect on other similar stocks,” he said.
“If the IPOs of Zomato and Paytm do well, then some of the other players that are into similar digital businesses will get marked up, as they will become benchmarks. That is why Just Dial is moving. If IndiaMart comes up with good numbers, it will move up again,” he said.
Zomato is a loss-making company and has warned that it may not come in black in the near future due to its large expenditure to capture market share. Some find it hard to digest that a historically loss-making company is venturing into Dalal Street. But Anand is not among them.
“Such listings are good for the market. There is nothing wrong with that, but the valuation should be good,” he said.
So will he invest in the company in the near future? “It depends if the company’s business model stays undisrupted,” Anand said. He cited many things that may not go right for the company, including Tata’s digital venture and regulatory risks.
“If N Chandrasekhar announces acquisition of some big company, if they launch their app and become aggressive. They already have Qmin (a food delivery app run by The Indian Hotels Company). Then I will have to see,” he said. Anand said one also needs to see at what valuation Swiggy hits the market.
Market Outlook
Over the past few weeks, there has been a sense of uncertainty on the market direction and stocks have been witnessing profit booking at higher levels.
Anand advises investors to remain stock specific. “If you find a certain picks of the market expensive, then move into some other segment. It is better to be stock specific according to the narrative,” he said.
He said the recent changes in the central government may also bring in any disruption in the market. “There is a portfolio reshuffle in the government. So, if somebody starts giving environmental clearances and starts getting FDIs, then the entire equation will change,” he said.
