Bulk Deal Alert! Ashish Kacholia Makes Fresh Entry in this Smallcap Stock. Sells Stake in Midcap IT Company

Microcap stock Agarwal Industrial rallied 7% to touch a high of Rs 600 in early trade today.

Meanwhile, midcap IT company Mastek fell 3% to touch a low of Rs 2,131.

Both these companies have one thing in common - Ashish Kacholia.

One of the top investing gurus of India, Ashish Kacholia yesterday sold his entire stake in Mastek and bought a stake in petrochemical company Agarwal Industrial.

This data was reported by the exchanges post market hours yesterday so the effect on both the company's share price was seen today.

Before we delve deep into the reasons on why Kacholia made such a move, let's take a look at who Ashish Kacholia is and what are some of his top picks.

A word about Ashish Kacholia

Ashish Kacholia is one of the leading investors in the Indian stock market. He is often referred to as 'Big Whale'.

Kacholia is well-known for his stock picks in the small and midcap sectors. He often picks the best midcap stocks to buy.

Alongside Rakesh Jhunjhunwala, Ashish Kacholia established Hungama Digital.

He has worked for Prime Securities and Edelweiss Capital. In 2003 he established his own company Lucky Securities.

As per available data, Kacholia publicly owns 38 stocks. Here are Kacholia's top holdings as of June 2022.

Please note, the source of holdings listed below is from Ace Equity and it may or may not be a complete list of holdings.

Company	Stake (%)
Faze Three	5.00%
Inflame Appliances	4.20%
Xpro India	3.90%
Repro India	3.60%
NIIT	2.20%
IOL Chemicals	2.00%
Gravita	1.80%
La Opala RG	1.40%
Barbeque Nation	1.10%

Source: Ace Equity

Why Did Kacholia Sell Mastek?

NSE bulk deal data showed that Kacholia sold 5.5 lakh shares of Mastek at Rs 2,110 yesterday. These shares were picked up by Smallcap World Fund in a block deal.

Mastek's shareholding pattern for June 2022 showed that Kacholia had 5.5 lakh shares or a 1.83% stake. That means he completely sold his stake in Mastek yesterday.

Kacholia first entered Mastek in September 2020 by picking up a 2.9% stake.

While we don't the reasons why Kacholia offloaded Mastek, here are some we can guess...

In the period between March 2022 to June 2022, Kacholia sold 50,000 shares Mastek showing first signs of bearishness.

Another reason could be the sentiment for IT sector. By now, you must have heard that IT stocks are having their worst start in 2022.

IT stocks are falling as US market is sending signals of a possible recession. There are other reasons as well such as the attrition problem and big companies like TCS, Infosys among others reporting subdued results.

All this has dampened the sentiment of IT sector. This could be one reason why Kacholia thought of exiting Mastek before things started to get worse.

Mastek's stock performance also doesn't paint a good picture. Shares of the company are trading very close to their 52-week low.

Why Did Kacholia Buy Agarwal Industries?

Coming to buying...

Kacholia bought 3.72 lakh shares of Agarwal Industrial at Rs 505 per share.

Such a big activity often sends microcap stocks soaring. This is exactly what happened yesterday. Agarwal Industrial ended 13% higher yesterday. It continued its rally and soared 7% today.

Here are some reasons we can guess about why Kacholia bought stake in the petrochemical company.

What does Agarwal Industries do?

Incorporated in 1995, Agarwal Industrial is involved in the business of manufacturing and trading of bitumen and bituminous products and transportation of specialised bulk bitumen and LPG. Together this contributes around 95% of operating income.

It is also involved in generation of power through windmills situated in Jaisalmer (Rajasthan) and Dhulia (Maharashtra).

One reason why Kacholia added this stock in his portfolio could be the replacement factor. Smart investors don't like idle cash lying around...so if you sell a stock, you may opt for replacing it with another one.

Another reason can be steadily increasing revenues in the first quarter.

Carefully take a look at the table below and see the highlighted part.

Agarwal Industrial Quarterly Performance

Rs m, consolidated	Jun-19	Sep-19	Dec-19	Mar-20	Jun-20	Sep-20	Dec-20	Mar-21	Jun-21	Sep-21	Dec-21	Mar-22
Net Sales	2,620.3	522.6	1,623.3	3,104.0	1,474.5	951.3	2,079.9	4,533.3	4,079.4	1,586.0	3,805.1	6,511.9
Operating Profit	129.9	83.1	95.8	180.3	90.6	93.4	190.4	354.7	255.1	130.2	334.0	375.8
Consolidated Net Profit	65.4	37.6	48.6	103.9	40.0	21.7	106.5	237.1	150.7	42.8	206.1	237.3

Data Source: Ace Equity

As can be seen, Agarwal Industrials reported higher revenue and profit in the last quarter as well as the first quarter of every year.

The company is yet to declare results for the first quarter, but history suggests the results may turn out to be good.

Also, Agarwal Industrial's revenues and profits have grown over the years. Take a look at the company's financial performance for the past few years.

Financial Snapshot

Rs m, consolidated	Mar-18	Mar-19	Mar-20	Mar-21	Mar-22
Total Income	4,149.9	5,322.3	7,897.9	9,055.0	15,982.0
Growth (%)	39%	28%	48%	15%	76%
PAT	102.8	134.5	255.5	405.3	636.0
Total Debt	956.8	766.5	902.7	1,301.9	1,467.0

Data Source: Ace Equity

No wonder shares of the company are up 66% over the past one year.

To know more, check out Agarwal Industrial financial factsheet and its Agarwal Industrial News and Analysis .

To conclude...

I'll let you in on a secret that you probably know already...investing is not easy. To be a successful investor, you'll need to do a lot of work.

The best investors out there know that controlling emotions and doing solid research is of utmost importance.

The results are rewarding but it can sometimes also be boring and frustrating.

That brings us to this question: Why bother doing all the hard work if the top investing gurus of India are doing it for you? Can't you just follow them?

Well, the retail crowd often follows this strategy. So yes, you can.

When I talk of top investing gurus of India, I'm referring to the likes of Rakesh Jhunjhunwala, Ashish Kacholia, Vijay Kedia, Radhakishan Damani, Dolly Khanna, among others.

Now, following these stock market gurus is not for everyone.

While keeping track of their activity is a good thing, replicating their portfolios blindly is a bad idea.

Sustained research must not be compromised before acting on stocks bought by gurus of stock market.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...