Rakesh Jhunjhunwala and Associates Increase Stake in this Penny Stock. Do You Own it?

"The Big Bull of the Indian share market is no more."

I remember waking up to this news on 14 August 2022. A wave of sadness spread across the stock market when Rakesh Jhunjhunwala passed away at the age of 62.

His story has inspired a lot of people. Investors often look up to him and his trading activities to make their own investment decision.

After his demise, investors have been tracking the activities of Rekha Jhunjhunwala and his firms to see what is happening in Rakesh Jhunjhunwala portfolio.

In this article, we talk about one such company which has caught the interest of Rekha Jhunjhunwala.

A word about Rakesh Jhunjhunwala

Rakesh Jhunjhunwala was an Indian billionaire stock trader and investor.

He used to manage his portfolio as a partner in his asset management firm, Rare Enterprises. He invested in both his own and his wife's name, Rekha Jhunjhunwala. He held the designation of Chartered Accountant.

Rakesh Jhunjhunwala was known as "India's Warren Buffett." According to Forbes, Jhunjhunwala was the 36th richest man in the country. He was worth Rs 460 bn when he passed away on 14 August 2022.

He was a director on the boards of several companies, including Viceroy Hotels, Concord Biotech, Provogue India, and Geojit Financial Services.

Which penny stock saw buying activity? And why?

As mentioned above, Rakesh Jhunjhunwala was a director on the board of Geojit Financial Services. This means he already held a stake in the company for a long time.

The latest shareholding pattern of Geojit Financial Services shows that Rekha Jhunjhunwala via Rakesh Jhunjhunwala and Associates, increased stake in Geojit during December 2022 quarter.

As of September 2022, the investor's stake in the company stood at 7.54%. In the quarter ended December 2022, the stake stands increased to 8.38%.

As of 31 December 2022, she holds around 20 million (m) shares of Geojit.

While we don't know why they bought more shares of Geojit Financial Services, there are some reasons we can guess...

First one being bright prospects of the mutual fund industry.

2022 was a wild, turbulent and volatile year for stock markets across the globe. However, Indian share markets outperformed their global peers.

One of the reasons why Indian share markets didn't crash as much as the 2008 financial crisis is because the markets were saved by inflows from domestic institutional investors (DIIs) and retail investors.

The mutual fund industry added Rs 2.2 trillion to its asset base in 2022, driven by a consistent monthly increase in SIP (Systematic Investment Plan) flows.

The Assets Under Management (AUM) of the mutual fund industry rose by 5.7% as per the data from the Association of Mutual Fund Industry (AMFI).

In 2022, the average monthly investment in SIPs was more than Rs 125 billion (bn) per month, which might increase to Rs 140 bn in 2023. Increased financial awareness and increasing returns from SIPs are likely to drive investments towards SIPs.

Mutual funds companies witnessed their highest collection of 2022 in December 2022. This suggests that as the calendar year changes, investors are also changing their investment focus. They are shifting towards mutual funds.

Increasing interest in mutual funds indicates tailwinds for the industry. The revenues of companies are expected to increase on the back of increased investments.

Having a strong and established market position in the retail broking segment, Geojit stands to be a big beneficiary as industry grows.

It has a strong presence in the delivery-based equity broking segment.

Apart from this, the company is a low debt company, effectively using its capital to generate profit. Its return on assets, return on equity (ROE), and return on capital (ROCE) has improved in the last 3 years.

Financial Snapshot of Geojit Financial Services (2018-2022)

Particulars	FY18	FY19	FY20	FY21	FY22
Long term Debt (Rs m)	0	0	0	0	0
Return on assets (in %)	9.2	3.6	6	10.9	11.1
Return on equity (in %)	13.9	5.7	10.2	21	21.7
Return on capital (in %)	20.8	11.5	14.5	28.7	29.8

Data Source: Ace Equity

Also, the company's shares are currently trading in a fair price zone. Its current price-to-earnings (PE) ratio is 10.6 whereas the average industry PE ratio is 18.7.

It is also attractively priced compared to its peers. Look at the table below.

Peer Comparison

Company Name	PE ratio	P/BV ratio
Geojit Financial Services	10.1	1.8
5Paisa Capital	41.5	2.2
ICICI Securities	12.5	6.2
Multi Commodity Exchange	42.3	3.7
Share India Securities	14.8	6.5

Data Source: Ace Equity

How shares of Geojit Financial Services have performed recently

Over the last one month, the share price of Geojit Financial Services has gained 6%.

In the past three years the company has rallied 73%.

The company touched its 52-week high of Rs 87.3 on 31 January 2022 and its 52-week low of Rs 43.3 on 20 June 2022.

About Geojit Financial Services

Geojit Financial Services is an investment services company in India headquartered in Kochi, Kerala. It operates a network of offices across India and the middle east.

It was the first company in India to launch online-trading facilities, develop franchise models of sub-broking, form joint ventures in west Asia, and the first to begin commodity futures trading in pepper, cardamom, gold, and silver in India.

The product offerings of the company include equities and derivatives to mutual funds, life and general insurance, commodities derivatives, and portfolio management services.

Through joint ventures and associates, the company has expanded its presence globally with offices in Dubai, Abu Dhabi, Sharjah, Al Ain, Muscat, Riyadh, Dammam, Bahrain, and Kuwait.

To know more about the company, check out its factsheet and quarterly results.

You can also compare the company with its peers:

Geojit Financial Services vs Prime Securities

Geojit Financial Services vs Monarch Networth Capital

Geojit Financial Services vs Amrapali Capital

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...