This stock zooms 44% after Rakesh Jhunjhunwala’s firm buys stake

Shares of Singer India, a leading manufacturer of sewing machines, have rallied 44% in the last two sessions after the block deal data available on the exchanges showed that Rare Investments, the investment arm of late Rakesh Jhunjhunwala and wife Rekha, acquired 4.25 million equity shares or 7.91% stake in the company on Tuesday. This is considered to be the last investment decision of Jhunjhunwala, also regarded as "India's Warren Buffett", who passed away on August 14. Besides Singer India, the big bull publicly owned stakes in 32 listed companies, which is estimated to be worth around ₹31,904.8 crore as of July, 2022.

Incorporated in 1977, Singer India Limited (SIL) is a well-established brand with a strong presence in the sewing machine industry in India as well as in the rapidly growing home appliances business under the Singer and Merritt brands.

RARE Investments acquired a stake in Singer India after parent entity, Retail Holdings India BV, offloaded 12 million shares or about 22% stake in the company through block deals on Tuesday. Post stake sale, Retail Holdings’ shareholding in Singer India declined to 35.31%, from 57.65% earlier.

As per exchange data, Jhunjhunwala's asset management firm purchased 4.25 million shares at ₹53.50 apiece after the parent sold equities via block deals. Among others, PGA Securities acquired 2.45 million shares, Gauri Tandon and Veena Kumari Tandon acquired 700,000 stocks of the company via block deals, data showed.

Following the developments, Singer India share price gained as much as 20% in the intraday trade on Wednesday, after hitting a 20% upper circuit the previous session after RARE Investments acquired shares in the company. The stock opened 8.46% higher at ₹75 on the BSE and surged 20% to touch a high of ₹82.95 during the day’s trade so far. Overall, the stock has risen 44% in two days following the stake sale by the promoter.

In the last one year, the stock has given 59% returns to its shareholders, while it has risen 32% in the calendar year 2022. The counter has gained momentum in the last one month, with share price surging nearly 88% during this period.

The microcap company reported profit after tax of ₹96 lakh in the first quarter ended June 2022, as against ₹28 lakh in the same period last year. The revenue grew by 49% year-on-year (YoY) to ₹109.53 crore over the corresponding period in the prior year (Q1 FY22).

“Despite this growth, the high inflation and volatility in the raw material prices lead to price instability which impacted the consumer demand mainly in the home appliances sector. In addition, the expected correction in the prices of raw material anticipated at the end of the quarter also led to destocking by many channel partners causing lower primary sales by the company in both sewing machines and home appliances,” the company said in its earnings report released on July 29.

During the April-June quarter, the company sold its idle leasehold land and building located in Jammu for ₹10.4 crore and the surrender of leasehold rights of land formalities was completed on July 13, 2022.

Commenting on the Q1 performance, Rajeev Bajaj, managing director of the firm, said, “The drop in commodity prices is expected to have a positive impact on sales and margins in the coming months. Whilst the company remains cautious in light of the continued possibility of recessionary conditions, the outlook remains positive and the company is in a strong position to weather any economic turbulence.”