Shalimar Paints

This small cap company, 109 years old, obviously a paint making company, is really no great shakes financially. Typical of a company of this size, the numbers are miniscule, wherein for Q2FY13, on a topline of Rs.124 crore, it posted a net profit at Rs.2.79 crore. Its equity base is very small at Rs.3.79 crore and it recently split its equity share of Rs. 10/- into 5 equity shares of Rs. 2/- each.  The company has three plants in Kolkata, Delhi and Nasik, with 54 branches and depots.

The buzz around the stock is more on account of its promoters stake sale rumours doing the rounds for some time now. The promoters, Jindals and the Jhunjhunwala Group jointly own 62.36% stake. There has been news that they plan to sell their stake and other paint companies like Kansai Nerolac  and Sherwin-Williams of USA had evinced interest. Sherwin especially because though it has been in India since Dec 2008, it needs a base like that of Shalimar to make its presence felt. The promoters, have been running the company in a very lackadaisical way which is evident from the numbers. Our Editor, expects the company to show a valuation of anything around Rs.800 crore and if promoters opt to sell their entire stake, the open offer for 26% under the new guidelines, presents a very good buying opportunity. And that explains why the stock price is way ahead of its fundamentals.