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Stock Analysis, IPO, Mutual Funds, Bonds & More

Bajaj Consumer Care rallies after promoters sell stake

The promoters will utilise the fund to repay their personal debt.

, ET Bureau|
Oct 18, 2019, 08.14 AM IST
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Analysts said valuation comfort at 17-18 times forward earnings is high.
Mumbai: Shares of Bajaj Consumer Care have rallied 34 per cent in two days after its promoters on Tuesday offloaded around 22 per cent stake in the company for Rs 628 crore through open market transactions. Mutual funds lapped up shares sold by the the debt-ridden promoters. This has eased concerns over high promoter level debt and analysts expect the gains to continue.

The promoters will utilise the fund to repay their personal debt. The majority of promoters’ pledge will come down after this stake sale. A host of funds including Aditya Birla Sun Life Mutual Fund, ICICI Prudential Mutual Fund, HDFC Mutual Fund and Steinberg India Emerging Opportunities Fund, were among the buyers of shares.

The stock ended up 11.6 per cent at Rs 261.90 on Thursday. The company's chairman Kushagra Bajaj told ETNow on Thursday that there is no further debt at the promoter level post the stake sale. “Post the stake sale, we have 38 per cent shareholding and none of that is pledged anymore. Definitely as per Sebi rules, you are allowed creeping acquisition and overtime, we will be raising our stake back to above 51 per cent over time as per the rules of the country,” said Bajaj.
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Analysts said valuation comfort at 17-18 times forward earnings is high. Despite the gains in the last two sessions, the stock is down 33 per cent for the last one year period.

“Valuation comfort is high. It is the cheapest stock in the staples space even after this rally,” said Abneesh Roy, senior VP, institutional equities at Edelweiss.

“Consumer companies should see recovery from the fourth quarter, including Bajaj Finance which gets 40 per cent of its sales from rural India. Bajaj Consumer is engaging with good consultants in the consumer space, Bain Capital, which should help the company in the long run,” said Roy.

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