Rekha Jhunjhunwala Cuts Stake in Escorts Kubota while Vijay Kedia Books Profit in Elecon Engineering

Throughout history, the world has witnessed legendary investors who have redefined the art of investing, inspiring millions.

These tactful visionaries earned their fortunes by seizing opportunities and making bold, calculated decisions, undeterred by risks. Their fearless approach to investing has shaped their success and cemented their place among the greatest financial minds.

India, too, has produced some of the most renowned and respected stock market investors, whose accomplishments have earned them recognition both domestically and on the global stage.

With an extraordinary ability to spot market trends, deep insights into the nation's economy, and a sharp instinct for strategic investments, these investors have built immense wealth while guiding others in the financial world.

In this article, we'll explore the latest portfolio changes made by these star investors, offering a glimpse into their evolving strategies and market outlook.

# Rakesh Jhunjhunwala & Associates Trim Stake in Auto Stock

The auto stock in question is Escorts Kubota.

Escorts Kubota, an Indian multinational conglomerate, specializes in manufacturing agricultural machinery, construction equipment, material handling tools, and railway equipment. Founded in 1944, the company operates in over 40 countries.

In recent years, it has undergone a transformation, including a name change to Escorts Kubota after the Japanese corporation Kubota acquired a significant stake.

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 Trim Stake in Escorts Kubota?

As per the latest shareholding pattern for the September 2024 quarter, Rekha Jhunjhunwala, through Rakesh Jhunjhunwala and Associates, sold 42,000 shares of Escorts Kubota, reducing their holding to 1,710,388 shares, down from 1,752,388 in the previous quarter.

This brings their stake down to 1.5%, from 1.6% in June 2024, reflecting a reduction of 0.1%. Notably, this stock has been part of the portfolio since 2015.

While no official reasons were given for the reduction, there are a few plausible explanations.

#1 Muted Q1 Performance

One possible reason could be the company's underwhelming performance in Q1FY24. For the June 2024 quarter, Escorts Kubota reported revenue of Rs 23.1 billion (bn), a 1.9% decline compared to Rs 23.6 bn in the same quarter last year.

Despite this, net profit saw a marginal improvement, rising by 1.1% to Rs 2.9 bn from Rs 2.8 bn a year earlier.

The lower revenue growth, combined with relatively flat profit margins, may have raised concerns about the company's near-term growth prospects.

#2 Promoter Stake Reduction

Another key factor that might have triggered the stake trimming is the slight reduction in promoter holdings.

During the September 2024 quarter, the promoters reduced their stake from 14.1% to 13.9%, a 0.2% decline.

Since promoters typically have insider knowledge of a company's internal affairs, such a move can be interpreted as a signal of internal uncertainties, possibly leading large shareholders to reconsider their positions.

#3 Institutional Selling Pressure

The trend of reducing stakes was not limited to the Jhunjhunwalas or the promoters.

Mutual funds and foreign institutional investors (FIIs) also trimmed their holdings in the company. Mutual fund holdings dropped from 8.6% in June 2024 to 8.4% in September 2024.

Meanwhile, FIIs reduced their stake by 0.1%, down to 6.3% from 6.4% in the same period. This collective selling pressure from institutional investors could have further influenced the decision to trim the stake.

Long-Term Outlook for Escorts Kubota

Despite the short-term challenges, Escorts Kubota's long-term fundamentals remain strong. Over the past five years, the company has grown its revenue at a CAGR of 7.2%, while net profit has grown even faster, at 17.1%.

Escort Kubota's Snapshot (FY22-24)

(Rs m, Consolidated)	FY20	FY21	FY22	FY23	FY24
Net Sales	58,101.00	70,144.00	72,827.00	84,287.00	88,496.00
Growth (%)	(-7.2)	20.7	3.8	15.7	5
Net Profit	4,717.00	8,716.00	7,356.00	6,367.00	10,491.00
Net Profit Margin (%)	8.1	12.4	10.1	7.6	11.9
Return on Equity (%)	15.2	17.4	9.7	7.8	11.4
Return on Capital (%)	20.6	23.3	13.3	10.4	15.4

Data Source: Equitymaster

The company is poised to benefit from a favourable macroeconomic environment, particularly in the agricultural sector.

With the recently concluded monsoon season seeing an 8% surplus over the long-period average, the upcoming crop cycles are expected to be favourable, providing a boost to tractor demand.

The Indian tractor industry, a core segment for Escorts Kubota, is projected to enter an upcycle from the second half of FY24, with the industry base turning favourable.

Additionally, Escorts Kubota is working on multiple initiatives to strengthen its position in both domestic and international markets.

These initiatives span product innovation, channel expansion, and capacity building, aiming to capture emerging opportunities in India and beyond.

Kubota Corporation's intention to increase sourcing from India further bolsters Escorts' medium-to-long-term growth potential.

# Vijay Kedia Books Profit in Engineering Stock

In a notable market move, ace investor Vijay Kedia has booked profit in the defence and engineering company Elecon Engineering.

This company, one of Asia's largest manufacturers of material handling equipment and industrial gears, has a global presence, with clients across the US, UK, and Europe.

Elecon operates in two segments: transmission and material handling equipment, serving key industries like steel, power, cement, and paper.

Who is Vijay Kedia?

Vijay Kishanlal Kedia is an Indian investor and trader based out of Mumbai. His company - Kedia Securities - is the largest shareholder (after the promoter) in several listed companies.

Kedia has been involved in the Indian stock market since 19. He has been described by many as a 'market master'.

To point out a few of his investments, he bought ACC at Rs 300 in 1992-93 and sold the stock around Rs 3,000 within a year and a half.

During 2004 and 2005, he picked several multibagger stocks which gave returns of over 1,000% in the next 10-12 years. A few of these stocks were Atul Auto, Aegis Logistics, and Cera Sanitary.

Why Did Vijay Kedia Trim Stake?

The latest shareholding pattern for Elecon Engineering shows that Kedia has reduced his holding from 1.3% to 1.2%.

He added this engineering stock to his portfolio in June 2021.

While no official reasons were given for the reduction, there are a few plausible explanations.

#1 Profit Booking

The stock of Elecon Engineering has rallied over 75% in the past year.

The significant stock rally can be attributed to its recent stock split.

The board of Elecon Engineering Ltd, at its meeting on 25 June, approved a stock split in the ratio of 1:2. This means that one share with a face value of Rs 2 were to be split into two shares having a face value of Re 1 each.

Additionally, Elecon delivered its best-ever financial performance in FY24, with revenue reaching Rs 19.4 bn, up 27% YoY, and profit after tax soaring 50% YoY to Rs 3.6 bn.

The company's growth prospects have been further strengthened by increased government capital expenditure and a focus on infrastructure development. Elecon's focus on expanding exports and rising order inquiries across various sectors positions it well to outpace industry growth.

Within its gears segment, the company experienced strong domestic performance, with orders from industries such as steel, power, cement, and paper benefiting from government infrastructure initiatives.

#2 Weak Q1 Earnings

Another possible reason for Kedia's decision to trim his stake could be Elecon's weaker-than-expected performance in Q1FY25. For the June 2024 quarter, the company reported revenue from operations of Rs 3.9 bn, a 5.3% decline from Rs 4.1 bn in the same quarter of FY24.

EBITDA also dropped 7.6% to Rs 0.9 bn from Rs 1 bn a year earlier. While net profit remained flat YoY at Rs 0.7 bn, it fell 30% sequentially. These softer results may have prompted profit-taking, especially after the stock's significant rally.

Despite the weak Q1, Elecon remains optimistic about a recovery in demand over the remaining months of FY25, which could help offset the losses incurred in the June quarter.

Long-Term Outlook for Elecon Engineering

Despite the short-term challenges, Elecon Engineering long-term fundamentals remain strong. Over the past five years, the company has grown its revenue at a CAGR of 7.2%, while net profit has grown even faster, at 17.1%.

Elecon Engineering Snapshot (FY22-24)

(Rs m, Consolidated)	FY20	FY21	FY22	FY23	FY24
Net Sales	10,885.00	10,444.00	12,119.00	15,297.00	19,374.00
Growth (%)	(-11.1)	(-4.1)	16	26.2	26.7
Net Profit	897	576	1,405.00	2,375.00	3,556.00
Net Profit Margin (%)	8.2	5.5	11.6	15.5	18.4
Return on Equity (%)	10.5	6.3	13.4	18.6	22.2
Return on Capital (%)	9.7	13.7	19.5	24.5	29.6

Data Source: Equitymaster

Looking ahead, Elecon Engineering is positioned to capture growth opportunities in both domestic and international markets.

The company has successfully onboarded 11 new original equipment manufacturers (OEMs) in international markets, with an estimated annual business volume of approximately €6 million. Commercial production from these partnerships is expected to begin in FY25.

However, Elecon's management remains cautious about the near-term outlook due to several factors.

These include the absence of large tender projects in India during the general election period, ongoing global uncertainty, and the potential impact of the US presidential election in Q3 FY25.

While demand inquiries remain strong, especially from Europe, supply chain disruptions and delivery delays pose risks to the timely execution of orders.

Nonetheless, Elecon's robust domestic demand and expanding export opportunities, driven by geopolitical shifts, suggest that the company is well-positioned for growth.

In Conclusion

When prominent investors like Rakesh Jhunjhunwala and Vijay Kedia sell or reduce their stakes in companies, it often raises the question of whether retail investors should follow suit.

While it's tempting to mimic their moves, it's essential to remember that their decisions may not necessarily reflect a negative outlook on the company's future.

These investors may sell for a variety of personal reasons, such as portfolio diversification, profit booking, or liquidity needs, none of which are directly tied to the company's long-term potential.

Before deciding to sell, it's crucial to consider your own investment goals, the company's financial health, and its future potential.

Blindly following the moves of high-profile investors can be risky, especially if their decisions don't align with your personal strategy. It's better to focus on long-term fundamentals and how the stock fits into your broader investment plan.

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