Big B Picking Minority Stakes In Small Cap Firms

11 August, 2011

Bollywood veteran Amitabh Bachchan had a disastrous fling with the corporate world in the 1990s. He, however, managed to restructure his company from ABCL to AB Corp and the new avatar of the company has mostly generated profits throughout the last decade. But always the one to experiment with new things, the superstar of Indian movies has suddenly become an active investor in the small cap space. The actor, in his individual capacity, has picked around one per cent stake in Yash Birla-promoted healthcare services firm Birla Pacific Medspa, after a similar move in another small firm, Neuland Laboratories, a few months ago.

On Tuesday, Big B had acquired 1 million shares or 0.9 per cent of Birla Pacific Medspa for Rs 1.8 crore. The shares were acquired at Rs 18.5 a piece, which is 85 per cent premium to the issue price of Rs 10 a share.

The firm, which had gone public only two months ago, saw its share price shoot up threefold within a few days of listing to hit a high of Rs 30.7 a share. But the pricing retreated over the past few weeks. However, Birla Pacific Medspa scrip rose 3.8 per cent in mid-day trading to Rs 18.95 a share on Wednesday, in a strong Mumbai market.

Birla Pacific Medspa is engaged in the business of beauty and healthcare treatment, and operates health and fitness centres under the brand name Evolve. It currently runs five centres in Mumbai and two more at Thane and Chennai on franchise basis. Around Rs 50 crore from the public issue will be used to open 55 Evolve Medspa centres across the country while the rest (Rs 15 crore) will be deployed for brand building and working capital requirements, among others.

Incidentally, Birla Pacific Medspa is also backed by ad-for-equity media investor Bennett, Coleman & Co Ltd (BCCL).  BCCL, which holds around 9.55 per cent stake in Birla Pacific Medspa, had subscribed shares last year at Rs 14 a piece and is sitting on unrealised gains of 35 per cent. BCCL had invested through subscription of warrants in March, 2009. The warrants were converted into equity shares in July, 2010, translating into a deal worth Rs 15 crore.

Birla Pacific Medspa reported a total income of Rs 1.7 crore, with a net loss of Rs 3.77 crore for the nine-month period ending December 31, 2010. It now commands a market cap of Rs 212 crore.

Not A One-Off Deal

For Amitabh Bachchan, this is not a one-off stock market investment, though. He had also picked around 1.7 per cent in another firm Neuland Laboratories, a Hyderabad-based manufacturer of active pharmaceutical ingredients (APIs).

Led by D R Rao, promoter, chairman and managing director of the company, Neuland recorded revenues of Rs 398 crore with net profit of Rs 5.2 crore in the financial year ended March, 2011. But high interest costs have eaten into its net margins for the past two years. The stock is trading close to its one-year low of Rs 90 a share. At mid-day trading, Neuland Labs was quoting at Rs 100 a share, up 2.41 per cent at the Bombay Stock Exchange in a strong Mumbai market.

Amitabh Bachchan had originally invested in Neuland between October-December (2010) quarter when the share price was hovering around Rs 110-Rs 160 and picked up more shares in the January-March period this year when it was trading around Rs 100-rs 140 a share. As of June 30, the actor held 1.7 per cent stake in Neuland.

How AB Corp Ltd Is Faring

Big B’s entertainment firm AB Corp Ltd had wobbled a bit after hitting a high of Rs 63 crore in revenues and Rs 30.7 crore in net profit in FY05. It posted revenues of Rs 23 crore with profit of Rs 9.7 crore in FY09, only to bounce back with almost 100 per cent jump in revenues to Rs 43 crore but the profit shrinking to Rs 6.5 crore for the year ended September, 2010. Bulk of last year’s profit was distributed as dividends, according to the company’s latest available annual report.

Amitabh Bachchan is the chairman of AB Corp and among its directors are immediate family members Jaya Bachchan and Abhishek Bachchan, besides family friend Vinay Maloo (former co-promoter of HFCL).

 


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Big B Picking Minority Stakes In Small Cap Firms

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