Marico Industries held centre stage last week as punters rushed to the counter following a ban on mustard oil by various state governments. Brokers say that the company is expected to benefit significantly from the ban as there could be a sizeable shift towards the company's brand of edible oils.
On the Bombay Stock Exchange (BSE), the scrip closed at Rs 280.10, gaining Rs 2.60 over the previous week's close. On the National Stock Exchange (NSE), the scrip moved up by Rs 5.25 to end the week at Rs 281.
Warburg Pincus, a private equity fund, picked up 5 lakh shares of the company in a negotiated deal on Thursday. The fund had earlier obtained clearance from the Foreign Investment Promotion Board (FIPB) to acquire 10 per cent Marico stake. "The stock is available at lower valuations and enjoys a strong brand presence in the hair oil segment. It is expected to move up in the next few trading sessions," said a dealer at a leading institutional brokerage.
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Brokers attribute the roller-coaster ride of the stock to selling by foreign institutional investors (FIIs).
"FIIs have been holding on to the stock for a long time. But when they found that the company is not performing, they decided to offload the stock," a broker added. Analysts say that if Marico succeeds in acquiring new brands, it may further consolidate its position. "There were rumours that the company is planning to acquire Ahmed Mills' Postman brand. Such a move will certainly give a boost to the market share of the company," they added.
Growth in volumes, hike in prices and stable raw material prices helped Marico to increase sales by 19.61 per cent to Rs 490.02 crore in 1997-98, while its net profit rose by 49.6 per cent to Rs 30.02 crore. The earnings per share (EPS) went up from Rs 13.85 to Rs 20.71, discounting the current price by 16 times.
The share price has already shot up by 25 per cent in the last fortnight and is now quoting around Rs 330. Despite increasing competition in the branded coconut oil market, Marico has managed to maintain a steady growth . The company's brands have grown by 10 to 22 per cent. Last year, it added `Parachute Lite' and `Parachute Nutri-sheen' variations to its flagship hair oil brand `Parachute'.
The company has commissioned a coconut oil plant at Goa which, along with higher export turnover, contributed to higher volumes growth. Despite an increase in promotional expenditure, Marico has managed to increase its operating margins from 8.85 per cent to 9.14 per cent in 1997-98.