How Segantii India grabbed opportunity to make a quick buck in Nykaa, Paytm

The firm first bought Nykaa shares on November 10, then it sold Nykaa shares on November 15, and has now reportedly picked up shares of Paytm

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Segantii India Mauritius – this entity’s name has cropped up several times in the past few days. The firm first bought Nykaa shares on November 10, then it sold Nykaa shares on November 15, and has now reportedly picked up shares of Paytm. The fund saw an opportunity to make a quick buck and grabbed it, said dealers and traders.

After Nykaa’s lock-in expired on November 9, when pre-IPO investors such as Narotam Sekhsaria and Lighthouse India Fund offloaded some of their stake, Segantii India Mauritius bought 37.9 lakh shares at an average price of Rs 175.75 apiece.

ALSO READ: Bulk Deals | Segantii India, Norges Bank and Aberdeen pick 2.53% stake in Nykaa; Sekhsaria, Lighthouse India exit company

On November 15, it sold 33.7 lakh shares at an average price of Rs 199.24 apiece, thus making Rs 23.5 profit on each share. Cumulative profit on the shares sold would be Rs 8 crore (33.7 lakh shares * Rs 23.5).

“Generally after the lock-in expiry, stocks see selling pressure as a large supply of shares hit the market. However, the price might bounce back in some days. They (Segantii) saw this as an opportunity to play the bounce and make some money,” said a dealer requesting anonymity.

Furthermore, the ex-date for Nykaa’s 1:5 bonus issue coincided with that of the lock-in expiry date, thus averting any potential fire sale as bonus shares get credited into account only after a few days. In fact, Nykaa gained 6.5 percent on November 10 and 10.41 percent the day after. That’s when Segantii India saw the opportunity to sell.

“Hedge funds and asset management institutions are always in search of opportunities like Nykaa where they can get price movements. They are playing on the short-term as well as ultra-momentum. Ultra momentum is characterised by high price movements as well as volatility within a short period of time,” said Bhaskar Radadiya of Sunrise Gilts & Securities. Radadiya has 15 years of experience in cash and derivatives segments.

Also Read: The good, bad and ugly of Nykaa’s bonus issue

On November 17, Segantii India Maurtius bought shares of marquee fintech firm Paytm, reported Reuters, citing sources. We could not corroborate this from the bulk deal data available on the National Stock Exchange.

However, market participants said that only the deals exceeding 0.5 percent of the share capital have to be reported to the exchange immediately. If Segantii has bought less than 32 lakh shares of Paytm, it goes under the radar as the amount is less than 0.5 percent of Paytm’s 64 crore fully paid-up equity shares.

If there’s a rebound in Paytm’s share price, Segantii could follow the same script as Nykaa, said dealers. Paytm closed 10.78 percent lower at Rs 539 apiece on November 17, as pre-IPO investor Softbank offloaded some of its stake.

Queries sent to Segantii were not answered at the time of publishing. This article will be updated once they respond.

Dubious past?

In May 2022, Bank of America and Citigroup suspended all equity trading with Segantii Capital Management, due to concerns about the hedge fund’s bets on sale of large blocks of shares. This was reported by Financial Times.

The move to reduce exposure to Segantii came after US authorities launched an investigation into block trading at several Wall Street financial institutions.

The hedge fund was founded in 2007 by British investor Simon Sadler, who is the current owner of Blackpool Football Club.

According to Forbes, Segantii is also among the 13 funds that have made a killing from Elon Musk’s $44 billion Twitter buyout at $54.20 per share. It is likely to have minted an estimated gain of $108 million on the 7 million shares of Twitter it acquired between April 1, 2022 and September 30, 2022.