Why Did Rakesh Jhunjhunwala Sell Stake in this Undervalued PSU Stock?

Metal stocks have rusted most in the June 2022 quarter.

Fears of a recession and the resulting weakness in demand for resources have caused metal stocks to tumble.

Metal stocks are also falling because the US dollar is getting stronger and thus, the rupee is falling.

The BSE metal index has slipped more than 29% in the past 3 months.

And the negative momentum still continues.

Amid all this, ace investor Rakesh Jhunjhunwala has likely exited from the National Aluminium Co. (NALCO).

Rakesh Jhunjhunwala's name is missing from the quarterly reports of the list of individual shareholders of the company.

The latest shareholding for NALCO showed that Rakesh Jhunjhunwala sold his stake.

To those who might not be aware, as per the exchange rules, every listed company must disclose the names of each individual shareholder who owns 1% or more of the company's shares in quarterly reports.

In the report of June 2022, the name of Rakesh Jhunjhunwala was not mentioned in the list. While, in the report of March 2022, he owned 1.4% shares of the company.

However, the rule does not require listed companies to disclose the details of share purchases and sales.

As a result, we will be unable to determine whether Rakesh Jhunjhunwala sold all of his shares in the company or sold just a partial stake.

Well, whatever may be the case, one conclusion is that the big bull is not very bullish on this metal stock.

Let's find out why...

A word about Rakesh Jhunjhunwala

Rakesh Jhunjhunwala is a billionaire stock trader and investor from India.

As a partner in his asset management firm, Rare Enterprises, he manages his own portfolio. He invests in both his own and his wife's Rekha Jhunjhunwala's names. He holds a Chartered Accountant designation.

Rakesh Jhunjhunwala has been labelled as "India's Warren Buffett."

Jhunjhunwala is the 36th richest man in the country, according to Forbes. He has 33 publicly traded stocks with a net worth of more than Rs 272 billion.

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

Why did Rakesh Jhunjhunwala exit this metal stock?

Rakesh Jhunjhunwala's shareholding was 25 m shares in NALCO, or say 1.36% of the company's total paid-up capital in the March 2022 quarter.

While we don't know for certain why the 'Big Bull' decided to sell his stake, there are some explanations.

The past few months of the global crisis have weakened metal stocks. And despite strong fundamentals, share prices of most metal stocks have fallen.

One of the reasons can be to book profits before the situations get more worse.

Coming to the performance of NALCO, in its latest quarterly result it has shown a flat growth with an increase of 9.6% in net profit YoY.

This could be another reason.

Aluminium prices have been extremely volatile recently, owing to geopolitical issues that the world has been dealing with.

Prices have cooled off due to concerns about Chinese demand.

Moreover, NALCO has been facing issues in the procurement of coal due to disruption in the global demand-supply.

Owing to such macro-economic reasons, the stock price has plunged by 43% in the last 3 months and still continues to fall.

On a YTD basis, the stock has plummeted by more than 27%.

About NALCO

Incorporated in 1981, National Aluminium Company, abbreviated as NALCO, is a government company that operates in mining, metals, and power under the ownership of the Ministry of Mines and the Government of India.

The government of India currently owns 51.3% of NALCO.

It is the country's largest integrated bauxite-alumina-aluminium-power complex, with bauxite mining, alumina refining, aluminium smelting, and casting.

In accordance with the Indian government's ambitious program, the company aims to be one of the leaders in sustainability.

The company has already commissioned 198 MW of wind power plants, with another 50 MW on the way, making it the largest producer of renewable energy among PSUs.

To know more about the company, check out NALCO company fact sheet and quarterly results.

You can also compare NALCO with its peers.

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