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Rakesh Jhunjhunwala Bats For A2Z; Buys Up Shares From Open Market

24 December, 2010

What if the listing of Delhi-based infrastructure services firm A2Z Maintenance & Engineering Services Ltd was a damp squib, one of its marquee investors – the big bull – is buying up the shares from the open market, reinforcing the faith in the company. Ace investor Rakesh Jhunjhunwala along with wife acquired 1.85% additional stake in Delhi-based infrastructure services firm A2Z Maintenance & Engineering Services Ltd on its debut, when the stock was not greeted with any fanfare by the investors. Interestingly, Jhunjhunwala had sold a part of his stake in the IPO. 

On Wednesday, Jhunjhunwalas acquired the shares at around Rs 350 a piece translating into a deal worth Rs 48 crore ($10.7 million). The stock had opened 2.5% below its issue price of Rs 400 and closed the day at Rs 329, about 17% below the issue price. The stock is up 2.77% during early trading hours on Friday, probably after the news that Jhunjhunwala bought up more shares in the company. The also dispels the concern that the company was overvalued at the IPO price (about Rs 3,000 crore).

The husband-wife duo who have co-invested in many other companies in the past, have thereby increased their combined holding from 16.88% to 18.53%.

Rakesh Jhunjhunwala held 21.03% stake pre IPO and was among the group of investors selling part of their holding. Jhunjhunwala had apparently tendered as much as 1 million shares for sale in the IPO. At the issue price this would have fetched Rs 40 crore or almost twice the total investment by Jhunjhunwala for his stake four years ago. Jhunjhunwala originally invested around Rs 21 crore which takes his cumulative exposure in the firm to around Rs 70 crore against his current holding’s worth Rs 469 crore(~$104 million).

Although the new share purchase by Jhunjhunwala is at a substantial premium to his original cost of purchases, fresh acquisition of shares means he is pretty bullish on the company that is also backed by private equity firms Beacon India Private Equity Fund and India Equity Partners.

The company is into EPC services for the power transmission and distribution sector with a focus primarily on the distribution segment. It is diversifying the business to provide EPC services to power generation companies and companies in other sectors, including road and telecommunications.

A2Z had revenue of Rs 1,225 crore with net profit of Rs 98 crore for the year ended March’10. The firm plans to use the money raised through the issue for investment in three biomass (bagasse)-based power cogeneration projects of 15 MW each in Punjab besides investment in five biomass-based power generation projects of 15 MW each in the Rajasthan, repayment of a loan granted by L&T Infrastructure Finance besides working capital requirements.

It had just acquired IL&FS Property Management & Services Ltd in a cash and stock deal through its subsidiary A2Z  Infraservices Ltd for Rs 25 crore. While Rs 7 crore cash payment was made to IL&FS Infrastructure Equity Fund and IL&FS Employees Welfare Trust, it diluted 20% stake in A2Z Infraservices as a part of the deal. IL&FS Property Management had total revenues of Rs 90 crore in FY10.


View Comments
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2 Comments
Abhishek . 6 years ago

RJ providing exit to anchor and other institutional investors who possibly were incentivised to subscribe in IPO.

Unfortunately, all of this doesn’t change the fundamentals of the company, valuations are extremely overvalued.

Anil Kamath . 6 years ago

Buying by Rakesh should not be taken at face value as him having conviction about the Pricing. His original investment in this company has seen a multifold rise (multibagger). For the miniscule cost of buying in the public markts, value of his overall investment in A2Z is maintained from deteriorating and possibly with this news may even improve because of price improvement. Cost-benefit analysis for him is clear and extremely convincing. Not necessasarily so for investors who are entering now..at least buying by Rakesh now should not be the determing factor or if one wants to consider it, the value of such a factor should be steeply discounted.

Rakesh Jhunjhunwala Bats For A2Z; Buys Up Shares From Open Market

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