Beaten-down Gitanjali Gems shares fail to deter LIC,others from raising stake

Gitanjali Gems share price has fallen 65%,but institutional investors,including LIC,are buying.

Written by Fe Bureau | Mumbai | Published: July 23, 2013 3:42 am

Despite a 65% fall in the share price of jewellery maker Gitanjali Gems in the April-June quarter,institutional investors,including LIC,have chosen to increase their holdings in the stock.

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According to stock exchange data,LIC bought around 4.84 lakh shares of Gitanjali Gems during the April-June quarter and increased its holding to 44.99 lakh shares (4.89% stake) compared to 40.15 lakh shares (4.36%) in the quarter ended March 2013.

Over the past quarters,LIC has more than doubled its holding in the company from around 18 lakh shares (1.95%) in Gitanjali during the quarter ending September 2012.

The value of LIC holdings in the company — pegged at Rs 248.9 crore during the March quarter — fell to Rs 103.5 crore at the end of the June quarter. In fact,since the start of July,Gitanjali Gems has lost a further 55.8% in value,implying that LIC and other investors would have seen a further fall in the value of their investments.

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The increase in LIC’s holding coincides with dramatic changes in gold import norms that have led to financial stress at the jewellery maker,which has been seeking additional funding from bankers to meet its working capital needs.

LIC was not the only domestic institution seen increasing its shareholding in the battered down stock.

Overall,domestic institutional holding in the company rose to 5.7% at the end of June versus 4.46% at the end of the March quarter.

Interesting,even foreign institutional investors,who were rumored to be selling out of gold and jewellery stocks after the clampdown on gold imports,increased their shareholding in Gitanjali Gems.

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Overall,FII shareholding rose to 2.52 crore shares (21.65%) in the June quarter,compared with 2.24 crore shares (19.98%) in the previous quarter and 1.72 crore shares (15.81%) in the December quarter. Public shareholding,on the other hand,rose to 44.98% during the June quarter from 40.56% in the previous quarter.

Australia-based Macquarie Bank investment bought an additional 10.23 lakh shares during the June quarter to increase its holding to 36.04 lakh shares (3.92%) as compared with 25.81 lakh shares (2.8%) in the quarter ending March 2013 and 9.6 lakh shares (1.04%) during the quarter ending September 2012.

The Australian financial services firm’s investment,which was valued at Rs 227 crore at the end of the March quarter,dropped to Rs 83 crore at the end of June quarter.

Gitanjali’s woes began in early June,after the Street sharply reacted to RBI guidelines to curb gold imports.

As a result,the scrip hit its lower trading circuit for the 21st consecutive sessions on Monday. The scrip ended at Rs 104.40 on the BSE,down Rs 5.45 or 4.96% from Friday’s close. The stock is down for the 24th straight session and has seen its market capitalisation erode to Rs 961 crore from over Rs 5,000 crore a month back.

In addition to restrictions in gold imports,the steep fall and volatility in international gold prices also forced lenders to take stock of their exposure to large gems and jewellery makers like Gitanjali. As of March quarter,the Mumbai-based jewellery firm was sitting on a gross debt of Rs 5,000 crore. While the company has not defaulted on any of its interest payments,promoters of Gitanjali Gems have asked banks to convert its non-fund exposure into fund exposure.

Meanwhile,rating agency Care downgraded Gitanjali’s bank facilities and debt instruments by one notch earlier this month.

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