Porinju Veliyath buys over 2 lakh shares in this smallcap firm; should you buy too


Smallcaps czar Porinju Veliyath-led Equity Intelligence India bought 2,12,000 shares of CimmcoBSE 9.98 % on March 23 at Rs 69.95 a share. Reacting on the deal, shares of the company hit the upper circuit of 20 per cent on Friday.

On a year-to-date basis, the stock is up 31 per cent till March 24, whereas the BSE Sensex has advanced 10.63 per cent in the same period.

Porinju Veliyath, MD & Portfolio manager of Equity Intelligence India, confirmed to ETMarkets.com that it was his personal investment on a potential turnaround of the business

In an interview with ETNow, Porinju had said on December 28 that out of his many picks, Bombay Burmah Trading CorporationBSE -1.71 % (BBTC) and Bengal & Assam Company could become the multibaggers of future.

Since then, share prices of BBTC and Bengal & Assam Company have surged 68 per cent and 72 per cent till March 24.

With a market capitalisation of Rs 190 crore, Cimmco was trading nearly 9 per cent higher at Rs 96 in early trade on Monday.

Here are five things you should know about Cimmco before investing:

About the company: Cimmco is engaged in manufacturing and selling wagons and engineering goods. Its manufacturing activities consist of manufacturing and supply of wagons to Indian Railway, manufacturing and supply of thermal power plants, fertilisers, cement plants, steel plants, and coal mines. Its cement group manufactures and supplies machinery, such as kilns, raw meal and cooler for cement plants. Its project group offers a range of services from concept to commissioning for industrial plants.

Financials: For the quarter ended December 31, 2016, the company reported net sales of Rs 40.09 crore, up 109 per cent from Rs 19.13 crore in the corresponding quarter last year. The company posted a net loss of Rs 1.20 crore during the quarter under review against a net loss of Rs 5.88 crore in the same quarter last year.

The company has been registering losses since FY13. Cimmco posted net loss of Rs 11.83 crore in FY16 against a net loss of Rs 25.78 crore, Rs 12.39 crore and Rs 10 crore reported for FY15, FY14 and FY13, respectively. However, net sales increased 111 per cent to Rs 66.59 crore for the financial year ended March 2016.

As per the company’s annual report, lack of order for procurement of wagons from Indian Railways affected Cimmco’s financial performance adversely.

Key risk: The company is engaged in manufacturing wagons, and this business is entirely dependent upon the policies of Indian Railways and any change in the policies whether positive or negative directly impacts the business of the company. The major raw material required by the company includes steel, specialised components including bogies, coupler sets and air brakes which are exposed to volatility in prices and availability in required specifications.

Promoters holding: The promoters hold 74.93 per cent stake in the company, while public held 25.07 per cent stake, according to the latest data available with BSE.

Key ratios: For the financial year ended March 2016, the company’s debt-to-equity ratio (D/E) was at 3.07 with current ratio of 0.82. D/E ratio and current ratio was at 3.59 and 1.11 as of March 2015.