Prashant Jain and Sunil Singhania picks up stake in this high ROE small-cap stock!
What makes this block deal even more captivating are the prominent names associated with it.
Last week witnessed a whirlwind of activity in the market, with the S&P BSE Sensex, the Bombay Stock Exchange's benchmark index, soaring to new heights. However, while the bulls celebrated, the Nifty bulls, who had been patiently waiting for their moment of triumph, faced a challenging test in recent trading sessions. They came tantalizingly close to reaching a new record high, only to fall short. As a result, the Nifty ended the week down by 0.85 percent, putting an end to its four-week winning streak. Nevertheless, amidst this excitement, the street was abuzz with a series of intriguing block deals.
Over the past five trading sessions, multiple block deals took place, catching the attention of market participants. Remarkably, some of the stocks involved in these block deals experienced a significant surge in their prices. Among these noteworthy block deals, one stood out and caught our attention: Landmark Car Ltd.
Landmark Car Ltd. made its debut on the exchanges in December of last year. Initially, the stock listed at Rs 471 on the NSE, falling short of its issue price of Rs 506. Unfortunately, its performance failed to impress, as the stock price continued its descent, hitting a low of Rs 431.15. However, in a surprising turn of events, Landmark Car Ltd. made an astonishing comeback, skyrocketing by 8.27 percent on Friday.
On that eventful Friday, a block deal took place involving Landmark Car Ltd. TPG Growth II SF sold its entire stake, which amounted to around 11.1 percent. What caught our attention was the fact that such a substantial block of shares was quickly absorbed, indicating a high level of interest from potential buyers. Consequently, the shareholding pattern shifted from a few owners holding large blocks to multiple owners holding smaller blocks.
What makes this block deal even more captivating are the prominent names associated with it. Notably, two ace investors, Sunil Singhania and Prashant Jain, were among the buyers of shares in this deal. These renowned fund managers require no introduction in the investment world.
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Sunil Singhania's Abakkus Asset Manager LLP & Abakkus Diversified Alpha Fund emerged as buyers, acquiring shares at an average price of Rs 658 per share. Similarly, Prashant Jain's fund, 3P India Equity Fund 1, purchased over 3 lakh shares at an average price of Rs 658 per share.
From a technical standpoint, Landmark Car Ltd.'s stock is currently trading within a broad range that has developed since the end of May. The upper end of the range lies between Rs 733-743, while the lower end rests at Rs 658. Therefore, this range holds significant importance for the stock's near to medium-term prospects from a technical standpoint.
Now, let's delve deeper into the business model and financials of the company. Landmark Car Ltd. operates in the retail automobile sector, handling dealerships for premium brands such as Mercedes-Benz, Honda, BYD, Jeep, Volkswagen, and most recently, MG Motors.
During FY23, the company successfully sold 21,310 cars across all original equipment manufacturer (OEM) partners and serviced an impressive 3,17,954 cars. Moreover, the average selling price of cars during the financial year rose from Rs 14.15 lakh to Rs 17.71 lakh, representing a substantial YoY jump of 25 percent. The return on equity for the year stood at 23.75 percent, while the return on capital employed (ROCE) reached 20.5 percent.
For the quarter ending on March 31,2023, Landmark Car Ltd. reported a gross profit of Rs 161 crore, EBITDA of Rs 64 crore, and a net profit after tax (PAT) of Rs 24 crore.
Looking ahead, the CEO of Landmark Car Ltd. envisions a structural change in India, with increasing aspiration levels and a diminished stigma around displaying wealth. The company plans to capitalize on this trend by focusing on selling higher average selling price (ASP) vehicles. Additionally, Landmark Car Ltd. aims to expand its body and paint (accident repair) business, which currently contributes around 40-45 percent of its revenue. Landmark Cars Ltd is a Small-Cap stock with a market cap of Rs 2,880 crore.
Given these developments, the bet made by ace investors like Sunil Singhania and Prashant Jain begs the question: Will it lead to top-class returns for their funds? We invite you to share your views in the comment section below and join the conversation.