This stock has rallied 31% in 4 days on fund buying; up 237% in 1 year

Sharda Motor hit a new high of Rs 2,618.80, surging 19% on the NSE in intra-day trade; has zoomed 31% in 4 days after promoter sold nearly 9% stake in the auto ancillary company via open market.

Shares of Sharda Motor Industries (SMIL) hit a new high of Rs 2,618.80, surging 19 per cent on the National Stock Exchange (NSE) in Monday’s intra-day trade. In the past four trading sessions, the stock has soared 31 per cent after mutual funds (MF) bought nearly 9 per cent stake in the auto ancillary company via open market deals.

In the past one year, the stock price of SMIL has zoomed 237 per cent, as compared to 25 per cent rise in Nifty 50.

On June 26, 2024, ICICI Prudential Mutual Fund, Nippon India Mutual Fund, HDFC Mutual Fund - HDFC Manufacturing Fund, Axis Small Cap Fund, HSBC Mutual Fund and Axis India Manufacturing Fund collectively acquired 1.84 million equity shares worth of Rs 367 crore of SMIL from the promoters.

 

The mutual funds bought these shares at price of Rs 1,996.10 per share via bulk deals on the NSE, the exchange data shows. As on March 31, 2024, the MFs held 0.04 per cent stake in SMIL, the shareholding pattern data shows.

Meanwhile, Mala Relan - part of the promoter group - sold 2.5 million equity shares representing 8.71 per cent of total equity of SMIL through the open market deals, the company said in an exchange filing. Post transaction, Mala Relan's holding in the company reduced to 0.02 per cent from 8.73 per cent.

SMIL undertook share buy-back between June 11 - June 18, 2024, and accordingly the company is in the process of extinguishing 1.03 million equity shares as part of buyback. Accordingly, the outstanding equity shares of SMIL will stand revised from 29.73 million to 28.7 million.

Accordingly, prior to buy-back Mala Relan was holding 2.6 million equity shares and post extinguishment of shares in buy-back the number of shares held by her got reduced to 2.51 million, the company said. The company had bought back shares at a price of Rs 1,800 per share via tender offer.

SMIL is India’s largest manufacturer of exhausts for automotive players. SMIL’s existing product profile comprises exhausts and suspension systems for passenger cars, utility vehicles, light commercial vehicles, medium and heavy commercial vehicles, and vans.

SMIL had reported a strong operational performance in the financial year 2023-24 (FY24), with consolidated profit after tax rising 44 per cent to Rs 299.6 crore. Earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin improved to 12.9 per cent from 10.4 per cent in FY23. Revenue grew 4 per cent to Rs 2,809 crore.

Improvement in profitability in fiscal 2024 was due to benefits of BS-VI real driving emissions (RDE) which was implemented from April 1, 2023. The new products were basically value-added sales parts which have ramped up from the second quarter of fiscal 2024 onwards. This led to improvement in the EBITDA margin along with good product mix and cost rationalisation measures undertaken by SMIL.

CRISIL Ratings believes that the company will maintain its robust business risk profile, driven by its strong market position in exhaust and suspension systems for passenger cars, utility vehicles, light commercial vehicles, medium and heavy commercial vehicles and vans along with pan India presence and sustained healthy profitability.

Growing working population and expanding middle class are expected to remain key demand drivers. India is emerging as a global hub for auto component sourcing and the industry exports over 25 per cent of its production annually. Auto component exports are expected to grow and reach $80 billion by FY26, according to SMIL.