Radhakishan Damani Books Profit in Smallcap Paper Stock

It's essential for investors to pay attention to what is happening in the stock market on a daily basis. It gives them an edge as they can always adapt to changing user behaviours.

In the same sense, we would also suggest paying particular attention to the buying and selling activity of top investors in India.

History suggests this activity could prove more effective and useful as people on the other side of the table have not only amassed substantial wealth but have also become revered icons in their field.

In this article, we will focus on the recent activity of Radhakishan Damani.

According to the latest exchange data, the seasoned investor has dumped stake in a paper stock.

Before we delve deep into the reasons why Damani made such a move, let's look at who is Radhakishan Damani and some of his top stock picks.

A Word About Radhakishan Damani

Radhakishan Damani is a Mumbai-based entrepreneur, businessman, and billionaire investor who founded India's mega-retail chain D-Mart.

Damani is considered to be one of the Big Bulls in the Indian stock market.

He manages his portfolio through his investment firms, Bright Star Investments and Derive Trading & Resorts.

Over the years, the veteran investor has invested in cement, technology, and retail sectors.

He is considered India's retail king after the March 2017 IPO of his supermarket chain, Avenue Supermarts.

Which Paper Stock did Radhakishan Damani Sell and Why?

In the June 2023 quarter, Radhakishan Damani held 1.26% stake in Andhra Paper, with 499,296 shares.

The company recently filed its shareholding pattern for September 2023 and Damani's stake in the company came down to 1% or 399,296 shares.

Damani has invested in Andhra Paper via one of his firms Bright Star Investment.

Listed companies have to report details of shareholders who own more than 1% stake in a company.

While we don't know why he decreased stake in the company, there are some explanations...

The first one is profit booking. Between July 2023 and September 2023, shares of Andhra Paper have seen a sharp spike.

Andhra Paper shares were rangebound throughout the year, before breaking out in August 2023.

Ahead of the festive season, demand for paper is rising. Experts are of the view that paper consumption is gaining momentum on the back of packaging from e-commerce segment, among other things.

There are other reasons too which add to the momentum in the overall paper sector.

A report by the industry body Indian Paper Manufacturers Association (IPMA) also noted that paper consumption in India is set to reach 30 million tons by 2027 as the industry's fortune is linked to a number of economic indicators.

Another factor that adds to the positive sentiment is the impending implementation of the National Education Policy (NEP).

As the education sector goes through a revamp, experts suggest there'll be a surge in demand for new educational material. This is a big plus for paper stocks.

The old material will also have to be recycled, so you can see why paper stocks have been in demand.

Seeing all these positives factored in the stock to some extent, Damani must have opted to take some money of the table.

Remember, he hasn't exited the stock full and still holds about a percent in the paper manufacturer.

What Next for Andhra Paper?

For the first quarter of FY24, Andhra Paper posted net profit of Rs 1.2 billion (bn) as compared to Rs 0.8 bn posted in the year ago quarter and Rs 1.5 bn posted in March 2023.

Revenue grew marginally to Rs 4.8 bn compared to Rs 4.5 bn in the same period a year ago.

Andhra Paper has reported steady growth in revenue for the past few quarters and is expected to give a good second quarter too.

The company also gets strong support from its parent West Coast Paper Mills.

Given the company's strong capex plan and the presence in diversified and value-added products, Andhra Paper gets strategic importance as is likely to be a key growth driver of the West Coast group.

The company's latest shareholding pattern also shows that foreign investors have added more exposure in the company in September 2023.

While domestic mutual funds continue to pare stake in the paper manufacturer.

At the current price, Andhra Paper trades at a PE multiple of 4.2x compared to its five-year average PE multiple of 7.9x.

On the price to book value front, Andhra Paper trades at a P/BV multiple of 1.4x compared to its long-term average of 1.4x.

A word of caution...

Whatever you do, please do not base your decision on emotions or sentiments or what other investors think.

Have a proper, independent rationale irrespective of whether it turns out to be right or wrong.

This way, you will develop a sound framework which would hold you in good stead over the long term.

About Andhra Paper

Andhra Paper is engaged in manufacturing and sale of paper, pulp and paper & paper board.

It derives major chunk of revenues from India and around 15% from the export market.

In October 2019, West Coast Paper Mills acquired a controlling stake in the company from the erstwhile Holding company and public shareholders.

To know more about the company, check out Andhra Paper's financial factsheet and its latest quarterly results.

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...