Bulk Deal Alert: Radhakishan Damani Sells Over 290,000 Shares of Andhra Paper

It's essential for investors to pay attention to what's happening in the stock market on a daily basis. It gives them an edge as they can always adapt to changing user behaviours.

In the same sense, we would also suggest paying attention to the buying and selling activity of top investors in India.

History suggests this activity could prove more effective and useful as people on the other side of the table have not only amassed substantial wealth but have also become revered icons in their field.

Ashish Kacholia, Vijay Kedia, Sunil Singhania, among others are renowned names in the Indian stock market. Whenever they buy or sell stake in a company, investors are all earns.

One more addition can be made to the above list - Radhakishan Damani.

And the latest shareholding pattern of a paper stock suggests the seasoned investor has dumped stake in the company second time in less than a year.

Before we delve deep into the reasons why Damani made such a move, let's look at who is Radhakishan Damani and some of his top stock picks.

A Word About Radhakishan Damani

Radhakishan Damani is a Mumbai-based entrepreneur, businessman, and billionaire investor who founded India's mega-retail chain D-Mart.

Damani is one of the Big Bulls in the Indian stock market.

He manages his portfolio through his investment firms, Bright Star Investments and Derive Trading & Resorts.

Over the years, the veteran investor has invested in cement, technology, and retail sectors.

He is considered India's retail king after the March 2017 IPO of his supermarket chain, Avenue Supermarts.

Which Smallcap Stock did Radhakishan Damani Sell and Why?

The smallcap company in question is Andhra Paper.

According to exchange data, Radhakishan Damani sold 299,296 shares of the paper company on 5 February 2024.

This bulk deal resulted in massive selling in the stock, taking it down over 9% in intraday trade.

As of December 2023, Damani, via his firm Brightstar, held 399,296 shares of the company or 1% stake.

After the recent bulk deal, he only holds 100,000 shares or a little under 0.5%.

Note that Damani had sold shares of Andhra Paper last year as well. In the June 2023 quarter, Radhakishan Damani held 1.26% stake in Andhra Paper, with 499,296 shares.

In the September 2023 quarter, Damani's stake in the company came down to 1% or 399,296 shares.

Ever since Damani sold stake last year, shares have remained rangebound. Maybe that's the reason why Damani decided to take some money off the table and invest it in another stock where risk-reward is favourable.

The demand for paper was rising ahead of the festive season, so paper stocks saw a sharp rally. Paper consumption gained momentum on the back of packaging from e-commerce segment, among other things.

There are other reasons too which add to the momentum in the overall paper sector.

As the education sector goes through a revamp, experts suggest there'll be a surge in demand for new educational material. This is a big plus for paper stocks.

Seeing all these positives factored in the stock to some extent, Damani must have opted to take some money of the table.

Remember, he hasn't exited the stock full and still holds around 100,000 shares in the paper manufacturer.

What Next for Andhra Paper?

Last week, the company posted its Q3 results where revenue and profit were lower compared to the year ago period due to higher base.

Note that Andhra Paper has seen a sharp turnaround in the past two years. In 2023, it was able to quickly capitalize on its product mix and saw demand rise in various segments including writing paper, printing paper and industrial application products.

Recently, the company's board approved an installation of tissue paper machine at Andhra Pradesh with a capacity to produce 100 tons per day with state-of-the art technology to extend product portfolio through production of different grades of tissue paper.

This will require capital investment outlay of around Rs 2.7 bn.

Apart from the above outlay, Andhra Paper has an overall capex of Rs 5.3 bn to upgrade the existing pulp and recovery island, replace the existing obsolete size press with modern automated film press, and upgrade the Kadiyam Paper Machine.

Andhra Paper also gets strong support from its parent West Coast Paper Mills.

Given the company's strong capex plan and the presence in diversified and value-added products, Andhra Paper gets strategic importance as is likely to be a key growth driver of the West Coast group.

However, one should also factor in Andhra Paper's upcoming plant closures, where two of its plants will be non-operational for around one month in the January 2024 - March 2024 period.

While it may have some impact on operations in the current quarter, this effort is expected to improve the realisations, profitability margins and also save on cost in the future.

How Andhra Paper Share Price has Performed Recently

Following the bulk deal, share price of Andhra Paper fell 9% to Rs 531 on 5 February 2024.

In the past one year, shares of the company have gained 20% while in 2024 so far, Andhra Paper shares are down 10%.

Andhra Paper has a 52-week high of Rs 675 touched on 11 October 2023 and a 52-week low of Rs 392 touched on 26 June 2023.

Here's a table comparing Andhra Paper with its peers.

Comparative Analysis

Company	Andhra Paper	Emami Paper	Satia Ind	West Coast
ROE (%)	39.1	16.1	30.1	33.1
ROCE (%)	51.1	10.5	20.6	40.3
Latest EPS (Rs)	114.5	1.3	24.3	94.5
TTM PE (x)	4.6	95.2	5.5	6.4
TTM Price to book (x)	1.2	1.1	1.6	2.1
Dividend yield (%)	2.4	1.3	0.3	1.4
Industry PE	7.8
Industry PB	1.4

Data Source: Ace Equity

About Andhra Paper

Andhra Paper is engaged in manufacturing and sale of paper, pulp and paper & paper board.

It derives major chunk of revenues from India and around 15% from the export market.

In October 2019, West Coast Paper Mills acquired a controlling stake in the company from the erstwhile Holding company and public shareholders.

To know more about the company, check out Andhra Paper's financial factsheet and its latest quarterly results.

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...