Sintex founders to up stake by 4.78% to 40%

The promoters of Sintex Industries, who are under pressure after the company’s share took a hammering owing to fears over unhedged exposure to foreign bonds, are looking to up their holding in the company from the current 35.22% to 40%, managing director Amit D Patel said.

Speaking to analysts at a post-earnings conference call on Tuesday, he said the current price of the stock is ‘excellent’ and the promoters, of whom he is one, could increase their stake to 40%.

He did not specify the price at which they will buy or the timeline for the purchases.

The stock closed 0.52% higher at Rs115.70 on Tuesday. At that price, buying 4.78% of Sintex will cost the promoters about Rs151 crore, pegging the market capitalisation of the company at Rs3,160 crore.

Sunil Kanojia, group president, Sintex, said promoters upping their holding in the company reflects the confidence they have in the company. “They are more comfortable with holding 40% and they have been raising their stake,” he noted. At the end of 2009-10, the promoter holding was 30.20%.

Sageraj Bariya, managing partner, Equitorials, concurred with Kanojia on the positive impact of such a measure for a scrip. “It also conveys to the investor that the stock is grossly undervalued.”

Sintex has been under severe pressure lately owing to concerns about the unhedged portion of company’s $225 million foreign currency convertible bonds maturing in 2013. The rupee depreciated from Rs44.5 per dollar to Rs49.5 in the July-September period.

Shares of the company plunged 30% between September 21 and October 4 to touch a 52-week low of Rs103. The Sensex fell 7% in the same period.

After allowing for notional forex losses of Rs60 crore, Sintex’s consolidated net profit in Q2 declined 61% from a year ago to Rs38.80 crore on a 25% increase in its topline to Rs1,153.6 crore. If the rupee appreciates against the dollar, the forex losses will be reversed.

Sintex, which is best known for its storage tanks, is involved in custom moulding, building materials and textiles.

Custom moulding refers to composites which are products made from combining two or more different materials and used by original equipment manufacturers in the medical imaging, aerospace and automotive sectors. Building materials refer to monolithic construction and prefabricated structures.

Monolithic construction is a building solution where a mould of a structure is made and erected at the construction site and liquid concrete is poured through the mould, which is then removed.

This is cheaper and takes a shorter time to build than conventional buildings so it’s preferred by the government for, among other things, low-cost housing. Prefab structures are those that consist of several factory-built components that are assembled on-site. They are used for schools in rural areas, healthcare centres, agricultural shelters, small warehouses, lavatories and worker residences at construction sites.