Synopsis: The shares of SG Finserve and Apollo Pipes were in the limelight after S Gupta Holdings bought stakes worth close to Rs 29 crore through bulk deals. Although SG Finserve registered a modest increase, Apollo Pipes registered a sharp share price increase. The acquisition indicates strategic confidence, although valuation comfort and sector risks are important factors to watch out for.
Two stocks were in the limelight after S Gupta Holdings purchased stakes worth approximately Rs 29 crore through bulk deals. The acquisition triggered buying interest in the two stocks, with one stock registering stronger price movements. The selective buying is in a scenario where sector dynamics are undergoing changes in the NBFC and infrastructure-manufacturing sectors, ruling out speculative buying by the acquirer.
SG Finserve Ltd
SG Finserve Limited (SGFL) is a tech-enabled RBI-registered non-banking finance company (NBFC) providing inclusive business financing solutions to channel partners – dealers, distributors, retailers, buyers, suppliers, transporters/logistics, etc. – of Indian corporates. SGFL leverages technology and a distribution network to offer tailored financing solutions to SMEs, MSMEs and other corporates.
With a market cap of Rs 2,266 crore, the shares of SG Finserve Ltd jumped 2 per cent in today’s trading session and reached a high of Rs 412.70. When compared to its previous day’s closing price of Rs 405.85, the shares are trading at a PE of 20.7 compared to its industry PE of 18.5.
The fact that S Gupta Holding acquired 3 lakh shares (0.53% stake) worth Rs 12.24 crore at Rs 408.26 per share indicates selective buying in the NBFC sector. In the current tight liquidity scenario and with the changing RBI guidelines, such accumulation could be a sign of confidence in the stability of asset quality or credit growth.
For an NBFC like SG Finserve, the major catalysts to focus on will be net interest margin (NIM), GNPA/NNPA ratios, and cost of funds. If credit growth is maintained at a healthy level and asset quality is managed well, re-rating of the stock on valuation metrics is possible. However, a rise in interest rates or provisioning requirements could impact profitability.
Apollo Pipes Ltd
Apollo Pipes is involved in the manufacturing and trading of cPVC, uPVC, and HDPE pipes, PVC taps, fittings, water storage tanks, solvents, etc. Apollo Pipes is one of the top 10 leading piping solution-providing companies in India. The products are used in various industrial segments such as agriculture, water management, construction, infrastructure, and telecom ducting.
With a market cap of Rs 1,447 crore, the shares of Apollo Pipes Ltd gained 7 per cent in today’s trading session and reached a high of Rs 341.85. When compared to its previous day’s closing price of Rs 319.45, the shares are trading at a PE of 89 compared to its industry PE of 22.1.
The acquisition of close to 5.25 lakh shares (aggregated), representing a 1.19% stake valued at Rs 16.64 crore at the Rs 317 level, indicates confidence in Apollo Pipes. Bulk acquisitions at a particular price range usually indicate that the acquirer is either impressed by the potential for earnings growth, margin expansion, or industry trends. The PVC pipe industry in India is a robust one, driven by housing requirements, irrigation development, government infrastructure outlays, and plumbing developments in tier-2/3 cities.
From a market signalling point of view, accumulation by a promoter or strategic group entity can be a confidence-building measure. If Apollo Pipes is currently around the support levels, this acquisition may provide a stabilizing influence on the stock price. Nevertheless, the sustainability of the price appreciation would depend on the trends in raw material prices (PVC resin), volume growth, and margin expansion in the coming quarters.
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Written by Leon Mendonca
