Bulk Deal Alert: Sumeet Nagar's Malabar India Fund Trims Stake in This Smallcap Stock

Making millions through equity investments is a common dream shared by many retail investors.

They yearn to achieve financial success and impersonate remarkable earnings as their investment idols.

However, the journey towards achieving such lofty financial goals is challenging. Retail investors often find themselves navigating a complex landscape that demands a deep understanding of market dynamics, astute analysis of investment opportunities, and the ability to make sound decisions amid uncertainty.

To bridge this gap, retail investors often look to their investment idols for guidance and inspiration.

These idols are revered figures who have demonstrated exceptional success in the equity market.

In today's article, we'll take a look at one such investing guru and his recent activity in smallcap stocks.

The ace investor is Sumeet Nagar.

Who is Sumeet Nagar?

Sumeet Nagar is the co-founder of Malabar Ventures LLC. Malabar is a foreign portfolio investor (FPI) with a particular emphasis on India's small and mid-cap stocks.

His amazing track record in the smallcap and midcap space is no fluke.

He has a solid decision-making process on which stocks to buy, how much to buy, and, equally importantly, when to sell.

Which smallcap stock did Sumeet Nagar sell and why?

The latest shareholding pattern of La Opala RG shows that Sumeet Nagar Via Malabar India Fund trimmed up around a 2% stake in the smallcap company through a bulk deal on 5 June 2023.

The ace investor sold 1.9 million (m) shares, or 1.7% stake, in the company for Rs 752 million (m).

According to bulk deal data from the exchanges, the deal was executed at a weighted average price of Rs 399 a share.

Other prominent shareholders in the company include veteran investor Ashish Kacholia, who holds a 1.6% stake.

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

#1 Profit booking

The smallcap zoomed 9.5% last month, following a move of 12% in the past three months. While in the past two months, the stock has gained 23%, this upward trend was catalysed by an increase in demand.

This surge is evident from its recent channel checks that indicate that the product has been steadily taking market share away from bone China and steel.

Also, in the past three years, the stock has given a multibagger return of 141.5%.

Considering this it appears that Sumeet Nagar has opted to book partial profits in the company.

#2 Weak financial performance

In recent quarters, the company's financial performance has deteriorated.

The revenue decreased from Rs 1.4 bn in September 2022 to Rs 1.3 bn in December 2022, and further declined to Rs 1.1 bn in March 2023. The decline was due to decrease in net sales.

The company's profitability also suffered as net profit declined in subsequent quarters. La Opala RG reported a net profit of Rs 391 m in the September 2022 quarter. This decreased to Rs 346 m in the December 2022 quarter and further to Rs 292 m in the March 2023 quarter. This was affected by rising raw material costs.

Moreover, the net profit margin showed a decline as well. Starting at 29% in September 2022, it decreased to 27.4% in the December 2022 quarter and further to 26.8% in the March 2023 quarter. This was driven down due to lower realisations.

Quarterly Results Of La Opala RG (September 2022- March 2023)

Particulars	22-Sep	22-Dec	23-Mar
Revenue (Rs in bn)	1.4	1.3	1.1
Net profit (Rs in m)	391	346	292
Net profit margin (%)	29	27.4	26.8

Source: Equitymaster

How the company performs in the coming quarters remains to be seen as input prices have started to moderate.

#3 FII selling

Another reason behind the decline is continuous selling by foreign institutional investors (FIIs).

FIIs have continuously sold stakes in the past five quarters, exiting the firm. FII holding stood at 6.4% in the December 2021 quarter. It now stands at 3.9%.

Look at the table below.

Quarter ending	21-Dec	22-Mar	22-Jun	Sep-22	Dec-22	Mar-23
Stake (%)	6.4	6	5.3	4.7	4.3	3.9

Source: Equitymaster

However, Malabar India Fund still holds a 3.9% stake in the company. It could be justified by moderating input prices.

Further, the company plans to expand its capacity and is likely to gain incremental market share. Furthermore, the company's likely expansion into Borosilicate glass will provide an avenue of growth.

For other stock picks of Sumeet Nagar, check out Sumeet Nagar's Portfolio and his top 5 stocks.

How shares of La Opala RG have performed recently

La Opala RG rose around 56.5% in the past one year. Over a month, the share price has gone up by 9.5%.

La Opala RG share price touched its 52-week high price of Rs 433.9 on 14 November 2022. Its 52-week low was Rs 243.0 touched on 17 June 2022.

La Opala RG is currently trading at a PE (price to earnings) multiple of 36.5 times.

About La Opala RG

La Opala RG Limited is an India-based tableware company. The company is a manufacturer and marketer of lifestyle products in the glassware segment.

It's engaged in the manufacture and marketing of opal glass tableware and lead crystalware products.

Its products portfolio includes Opal glassware, which include plates, bowls, dinner sets, and more.

The company's brands include La Opala, Diva, Cook Serve Store, and Solitaire Crystal. La Opala is the flagship brand of the company.

For more details, see the L Opala RG company fact sheet and quarterly results.

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

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...