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Why did Vijay Kedia sell stake in this penny stock?


The basic idea of this style is to look at the buying and selling activity of prominent investing gurus and making personal investing decisions based on that. 

And the idea is genuine. The top investing gurus have a solid track record of generating market beating returns over their career.

Dolly Khanna, Vijay Kedia,  Ashish Kacholia and many more feature on the list of top investing gurus of India.

Any movement by them in certain stocks brings that stock in the limelight. One such stock that has gained attention of late is Lykis.

Ace investor Vijay Kedia recently booked partial profits in Lykis by offloading a 1.4% stake.

But why did he do so? Was it just profit booking or were there other reasons?

While we don’t know the exact reasons, here’s are some reasons we can guess…

But before we delve into the reasons, let’s take a look at who Vijay Kedia is.

Who is Vijay Kedia?

Vijay Kedia is an Indian stock market investor. He is the managing director of ‘Kedia Securities’ and the largest shareholder (after the promoter) in several listed companies.

He has been in the Indian stock market since the age of 19. He has been described by many as a ‘market master’.

To point out a few of his investments, he bought ACC at 300 in 1992-93 and sold the stock for around 3,000 within a year and a half.

During the years 2004 and 2005, he picked several multibagger stocks, which gave returns of over 1,000% in the next 10-12 years. A few of these stocks were Atul Auto, Aegis Logistics, and Cera Sanitary.

Why did Vijay Kedia sell stake in Lykis?

As per the data, Kedia has fished out shares of Lykis worth 12.7 m.

 As per the bulk deal information on BSE, Vijay Kedia sold out 271,055 shares of Lykis at 47.21 per piece.

The investor, for the April to June quarter of 2022, had a 9.33% stake in the company with 1,807,911 shares. After the stake sale of 217,055 shares, this stake has come down to 7.93%.

This is not the first time the ace investor has offloaded stake in Lykis. In financial year 2021, the ace investor sold 25% of his shareholding, reducing the stake to 9.3%.

Vijay Kedia had first bought the stake in 2011-12 with 13.8% holding and became the non-executing chairman of the company. Over the years, the investor has reduced his holding by 42%.

While we do not know the exact reason why the investing guru decided to sell this stake, there are some explanations.

#1 Weak quarterly results

For the June 2022 quarter, the total revenue of the company saw a growth of 36% YoY to 863 m. However, on a QoQ basis, the income has shown degrowth of 7.8%.

Net profit also saw a degrowth of 63% to 9 m from 25 m in the same quarter of the previous year.

Operating profits have also reduced by 43% YoY to 16.9 m from 30.1 m in the June quarter of 2021.

This degrowth was due to slow demand and higher operating costs for the products.

It could be that Kedia turned cautious and sold stake in Lykis owing to its weak quarterly results.

 

#2 Input Cost Pressure

 Prices of vegetable oil, including palm oil and sunflower oil, the key commodities for FMCG companies, are up almost 50% over the last 12 months. 

Due to the increasing cost of raw materials, fuel and high labor costs, companies are seeing margin pressure across the sector.

For the June 2022 quarter, Lykis saw a 36% rise in the cost of goods sold (COGS) to 846 m. 

The slow demand in the sector has made it challenging to pass increased cost to the consumer. 

So this could be another reason why Kedia decided to sell stake.

 

#3 Profit Booking

This is the most obvious reason which we could think of. 

Share price of Lykis has increased from 28.75 to 51.75 in a little under two weeks.

The company’s share price has seen a sharp rise in the past two weeks and it could be that Kedia saw an opportunity and sold stake.

 

How shares of Lykis have performed recently

Over the last one month, the share price of Lykis has gained 65%.

So far in 2022, the stock has gained 18.5%. Over the last one year, shares of the company are up by 51.4%.

The company touched its 52-week high of 55 on 6 September 2022 and its 52-week low of 22.9 on 20 June 2022.

Lykis Share Performance- 1 Year 

 

Data Source- BSE

About Lykis

Lykis is an India-based home and personal care company. The company’s segments include Tea and FMCG. 

Its personal care products include hair care, deodorants, perfumes, skincare, and baby care product.

It offers product under the brands Britex, Rox, Cheers and Alivio. It carries out operation in 36 countries.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. 

This article is syndicated from Equitymaster.com

 

 

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