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  • Apr 17, 2023 - Rakesh Jhunjhunwala & Associates Enter this Multibagger Stock in Q4. More Details Inside...

Rakesh Jhunjhunwala & Associates Enter this Multibagger Stock in Q4. More Details Inside...

Apr 17, 2023

Rakesh Jhunjhunwala & Associates Enter this Multibagger Stock in Q4. More Details Inside

Ace investors are often known for picking up multibagger stocks.

Due to abundant resources and the experience they bring on the table, their investment decisions are often accurate.

That is why, when a big name like say Vijay Kedia decides to pick stake in a particular company, retail investors are all ears.

Today, for instance, it was reported that Vijay Kedia has invested in an auto ancillary company - Precision Camshafts. The stock ended 20% higher today when the benchmark Sensex was down around 800 points.

So you see why retail investors keep a close eye on their stock picks.

Lately, investors are keeping a close watch on a metal company as ace investor Rakesh Jhunjhunwala and Associates have taken an exposure.

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.

Why did Rekha Jhunjhunwala increase stake in this metal stock?

According to the latest shareholding pattern of Raghav Productivity Enhancers, Rekha Jhunjhunwala via Rakesh Jhunjhunwala and associates holds around 5.2% stake in the company as of March 2023 quarter.

In August 2021, big bull Rakesh Jhunjhunwala invested up to Rs 310 million (m) in the company. He bought around 600,000 unsecured compulsory convertible debentures (CCDs) of the company at a price of Rs 515 per unit.

The CCDs were liable to be converted into equity shares at the end of 18 months from the date of allotment. The deal was done on 26 July 2021. Hence the relevant date of the conversion was 26 January 2023. Resultantly, as a part of the deal, Rekha Jhunjhunwala owns a significant stake in the company now.

Along with Rekha Jhunjhunwala, prominent investors like Ashish Kacholia and Mukul Agarwal also hold more than 1% stake in the company.

While we don't know why all these ace investors have this stock in their portfolio, there are some reasons we can guess...

Financial year 2022 was the best year for the company where it reported a record high profit on the back of a 56% growth in revenues.

In the past five years, Raghav Productivity Enhancers has delivered multibagger returns of around 874%. The steep rally was driven by good business prospects.

The company is engaged in the business of silica ramming mass material. In fact, it is the world's largest producer of silica ramming mass material.

It is the only listed company and organised ramming mass manufacturing company in India. Before Raghav Productivity Enhancers, Tata Refractories was the big name in this industry but it is not listed and also its production capacity is also much lower compared to Raghav Productivity Enhancers.

It's the top company in its industry yet it commands only 10% market share of the domestic market and is establishing presence in the export markets.

The company offers customised lining solutions for secondary steel producers and foundries. It enables non-linear productivity growth and a massive reduction in power and overhead costs by at least 5 times.

In the last five quarters (from December 2021 to December 2022) the company's total sales did not grow at a rapid pace. However, the profits tell a different tale. In the said period, the net profit has seen a decent rise.

The net profit margins suffered in March 2022 but ever since then, margins have only gone up.

Quarterly Performance (December 2021 to December 2022)

Quarter ending Dec-21 Mar-22 Jun-22 Sep-22 Dec-22
Total sales (Rs in m) 240.0 320.0 334.0 360.0 339.0
Growth in sales (%) 0.0 33.0% 4.0% 8.0% -6.0%
Net profit (Rs in m) 43.0 51.0 53.0 62.0 66.0
Net profit margin (%) 18.4% 16.1% 16.0% 17.2% 19.5%
Data Source: Ace Equity

As of March 2022, the company has zero debt on its books.

It also has big capex plans in the pipeline.

No wonder ace investors are bullish on the company.

How shares of Raghav Productivity Enhancers have performed recently

Over the last five years, Raghav Productivity Enhancers share price has rallied 868%. In the last one year it went up by 59.3%.

In 2023 so far, the share price is up marginally by 0.3%.

The stock touched its 52-week high of Rs 1,180 on 16 January 2023 and its 52-week low of Rs 434 on 12 May 2022.


About Raghav Productivity Enhancers

Raghav Productivity Enhancers Limited operates as a stone supplier. The company manufactures and exports ferro alloys, ramming mass, silica ramming mixes, and pig iron.

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

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Which are the top multibagger stocks in India right now?

As per Equitymaster's Stock Screener, these are the stocks which have given multibagger returns to shareholders -

These companies have been ranked as per the returns they have delivered to shareholders in the last three years on a compounded annual growth rate (CAGR) basis.

Remember, it's not easy to identify future multibagger stocks, but if you do it carefully and with due diligence, you can find high growth companies which can turn out to become future multibaggers.

How to pick the best multibagger stocks in India?

While there's no guaranteed method, multibagger stocks have some qualitative rules.

#1 A solid competitive advantage

A company's ability to sustain its market share over time is what matters. A competitive advantage can be anything ranging from brand name and goodwill to patents, etc.

For example, IRCTC currently enjoys a 100% monopoly in its industry. It is an e-ticketing and catering company that has no competitors yet.

#2 Fast sales growth and a high current or future profitability

Consistent growth is certainly an indication the company is doing well and has good prospects. You should understand the business, its future prospects, expansion plans, and industry outlook.

#3 Low or falling debt levels

Multibagger stocks usually have low debt. If a company is highly leveraged and unable to generate profits, it can be a cause of concern for the investor.

#4 Growing free cash flow

Investors love companies that produce plenty of free cash flows. It signals a company's ability to repay debt, pay dividends, buy back stock, and facilitate the growth of business - all important undertakings from an investor's point of view.

#5 High and possibly increasing Return on Equity (ROE)

Equitymaster has a screener which can help you find high growth companies. You can start you search there.

And if you want to get a sense of how big returns could be, see our list of multibagger stocks here...

When should you sell a multibagger stock?

There isn't any standard thumb rule for when to sell a stock. However, you can follow a few guidelines.

You can sell the stock if the company's fundamentals take a turn for the worse. You could also sell if the stock has achieved the predetermined target price.

Other reasons for selling could be if the business has entered a mature or a declining phase in the growth cycle, and for rebalancing your portfolio.

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