Shalimar Paints

Shalimar Paints posted very good numbers for Q3FY13, it reported a 14% rise in net sales at Rs.143 crore and net profit rose 25% at Rs.5 crore. For 9MFY13, net profit is already at Rs.11 crore and looks like it will be able to post better numbers than FY12 where, for the year it had posted a net profit at Rs.14 crore.  This small cap company, 109 years old, per se, is really no great shakes financially when compared with its peers. Typical of a company of this size, the numbers are miniscule. 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. Especially, Sherwin which despite being in India since Dec 2008, 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.