Wendt India
Murugappa group company, an abrasives and precision component maker Wendt India, a Rs.10 face value stock, quoted at over Rs.1100, market cap of around Rs.233 crore, debt free, with a consistent dividend paying track record, as such does not look like a small cap stock. But its earnings drive home that point. Its performance, like in Q3 was not encouraging in Q4, with net sales at Rs.29 crore, up 16% (QOQ) and up 21% (YoY) but net profit is very small at Rs.2 crore, down from Rs.2.5 crore in Q3 and Rs.3 crore in previous Q3. This small net profit is what makes it a small cap but the rest, as we said, is larger than even some mid cap companies. Its equity capital is tiny at Rs.2 crore, explaining why it is ‘small cap’. Reserves as at 31st March 2014 stood at a whopping Rs.90 crore, making it an ideal bonus candidate.
The German parent holds 39.87% stake and Carborundum Universal holds 39.87%. Thus promoters stake is at 79.74%. The company imports over 50% of its raw materials, thus faces risk of volatile rupee but this is partly offset by its export revenue, which accounts for one fifth of its sales. The German parent is not averse to selling off its almost 40% stake and is even ready to offer it to Carborundum but is demanding the market price of Wendt, which is not acceptable to Carborundum. The stake of German parent was bought out by 3M and Carborundum has moved the Company Law Board saying that it has the first right of refusal to buy out shares of the parent. KPMG has suggested a fair price for the buyout which may or may not be accepted by 3M. Coming months could be interesting and this expectation alone will keep the share price buoyant. And as such it needs to sollow SEBI diktat and bring down the stake to 75%; thus interesting things could happen on the counter, which explains the stock price and high investor fancy. The company declared a total dividend of Rs.25/share for FY14.