Does promoter selling Rs 470 crore worth shares in Kalpataru Power signal tough times ahead?

Usually, promoters selling a stake in a company is considered lack of confidence in the business and leads to selling in stock markets. However, investors have disregarded the sale, and continued to buy stock.

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Analysts believe the promoters offloading nearly Rs 470 crore worth of stake in Kalpataru Power Transmission is not much of concern as the company has been doing very well. Though it is not known why the promoters sold their stake, analysts and investors seem unperturbed.

Three promoters offloaded shares worth Rs 467.83 crore in power transmission and infrastructure EPC company Kalpataru Power Transmission via open market transactions on May 30.

“The business is doing good in terms of debt and everything,” said a power sector analyst who plans to start coverage on it. “The promoter selling stake is not much of concern.”

Kalpataru Constructions, Parag Mofatraj Munot and Kalpataru Viniyog LLP were among the sellers while ICICI Prudential Mutual was one of the key buyers, the bulk deal data showed. Promoters held 47.24 percent stake or 7.67 crore shares in the company as of March 2023.

Usually, promoters selling a stake in a company is considered lack of confidence in the business and leads to selling in stock markets. However, investors have disregarded the sale and continued to buy stock.

On May 30 and May 31, the stock price jumped nearly 3 percent and 2 percent, respectively. Currently, it trades at Rs 532, much higher than the average price of Rs 485 at which promoters sold their stake.

Data shows that shares of Kalpataru Power have zoomed 19 percent in the last one week and are up 48 percent in the last one year. The analyst quoted above attributed the recent buying to strength in the business.

Amit Anwani, a research analyst at Prabhudas Lilladher, said the order book of the company is very strong. The order book stands at Rs 45,900 crore (including Linjemontage and Fasttel) and is L1 (leading bidder) in orders worth Rs 4,000 crore.

Linjemontage i Grastrop AB is Kalpataru’s Swedish arm and Fasttel Engenharia is Brazilian arm.

The order inflow for the company in FY23 came in at Rs 25,200 crore, up 39 percent YoY, driven by T&D and water segment. Fasttel’s order book stood at Rs 1,140 crore and Linjemontage’s order book stood at Rs 1,010 crore as of FY23.

Anwani said he has a positive view in the long run on Kalpataru Power with a target price of Rs 625 thanks to its strong order backlog and pipeline, focus on geographical expansion for segments such as water, railways, etc. and operational and cost synergy arising due to merger.
Kalpataru Power and JMC Projects merged in 2022.

Ashwani Sharma of ICICI Securities said the company is trying to reinvent itself into a global EPC company and the merger will likely strengthen its capability to undertake large complex EPC projects.

He expects the company’s return ratios to improve hereon and thus has a target price of Rs 630 on the stock.

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