Why Gujarat Fluorochemicals Share Price is Falling

Indian chemical stocks have been breaking records on the market recently. The rise in value was due to China plus one megatrend playing out, while depreciating rupee and increasing demand added to sentiment.

Due to this bullish outlook of the sector, even the beaten-down chemical stocks were on a tear.

Shares of the leading producer of fluoropolymers in India, Gujarat Fluorochemicals, surged more than 500% in three years.

However, the sentiment for the stock has changed in a week, wiping off 7% from its market value.

Let's find out what led to the sudden decline in share price.

#1 Promoter Sell Stake

Inox Leasing and Finance, the promoter entity of Gujarat Fluorochemicals, offloaded the company's shares worth Rs 5.9 billion (bn) through an open market transaction.

It sold 0.2 million (m) scrips, amounting to a 1.6% stake in the company in a bulk deal. The shares were sold at an average price of Rs 3,275.4 per piece, taking the aggregate value to Rs 5.9 bn.

As of September 2022 quarter, Inox Leasing and Finance owned a 54.9% stake in the company. With this stake sale, it now holds 53.3%.

Following the deal, the stock declined over 5% on Monday.

#2 Mutual Funds Join the bandwagon!

Mutual Funds have been selling their stake in Gujarat Fluorochemicals since March 2021. Mutual Fund holding in September 2021 quarter stood at 4.1%. It has now reduced by 0.37% YoY to 3.8%.

Apart from this, individual investors' holding has decreased from 15.1% in September 2021 quarter to 14.5% in September 2022.

Chemical sector stocks came under pressure due to the Russia-Ukraine war. Global chemical prices plummeted, ending the three-year bull run, leading to margins shrinking and raising doubts over the rich valuations of chemical companies.

Since then, the shareholding pattern of best chemical stocks has been witnessing high volatility.

For more details, you can have a look at Gujarat Fluorochemicals' latest shareholding pattern.

How shares of Gujarat Fluorochemicals have performed recently

Gujarat Fluorochemicals' share price is down 15% in the last one month. However, so far in 2022, the share price has risen by 32.1%.

The company touched its 52-week high of Rs 4,173.9 on 6 October 2022 and its 52-week low of Rs 2,005 on 20 December 2021.

Gujarat Fluorochemicals is currently trading at a PE (Price to Earnings) multiple of 33.7x, with the industry PE ratio being 25.8x. This makes it overvalued on the PE front.

About Gujarat Fluorochemicals

Gujarat Fluorochemical is a part of the Inox group of companies.

The business produces a wide range of chemicals to serve a variety of sectors. Its complex chemical facility in Dahej, Gujarat, includes a 110,000 tpa (tons per annum) caustic soda/chlorine plant. an 87,500 tpa chloromethane facility, and a captive power plant with a combined coal and gas capacity of around 90 megawatt.

With these cutting-edge plants in Dahej, Gujarat, it is also India's largest manufacturer of PTFE polymer.

The company is one of the most integrated PTFE manufacturers in the world, with backward integration that extends to caustic soda, hydrofluoric acid, and captive power.

Further, to diversify the business, it has two subsidiaries: Gujarat Fluorochemicals Limited Americas and Gujarat Fluorochemicals GmbH.

Through INOX Leisure, it runs a multiplex business. The company is further active in the global energy market through its subsidiary INOX Wind.

For more details about the company, you can have a look at these articles:Gujarat Fluorochemicals vs Tata Chemicals

Gujarat Fluorochemicals vs Aarti Industries

Gujarat Fluorochemicals vs Alkali Metals

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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...