Nawab of Dalal Street buys into NIIT. Which are the 4 other hidden gems in his portfolio?

Born in 1956, Damani is a member of the BSE (formerly Bombay Stock Exchange). He became a stockbroker in the 1980s and soon became a renowned investor due to his market insights and intelligent investment strategies. With a net worth of over ₹300 crore, as per current reports on shareholdings, he is often referred to as the ‘Nawab of Dalal Street.’

Damani is bullish on India and believes the next 20 years will be better than the previous 20 years, for both the country’s economy and stock markets.

In a recent media interview, Damani said he is not a large-cap or small-cap investor, that he is agnostic to the market capitalisation of stocks. But he always wants to buy value. Growth is a component of value. So it is not just that things should be cheap, they should also have good growth prospects.

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Investors across the length and breadth of India follow Damani’s portfolio movements keenly. On 23 August, he bought 800,000 shares of NIIT at ₹128 per share, which is about 0.59% of the company’s total equity. The transaction value exceeded ₹10 crore. As per Screener.in, Damani has four other large investments.

Here are the details of the five stocks this super investor has picked.

NIIT Ltd

First up is Damani’s latest addition to his portfolio, NIIT Ltd. Founded in 1981, NIIT is a skills and talent development corporation that has been addressing human resource challenges of the IT sector over the years. Maintaining prime focus on cultivating a robust workforce that could meet the evolving demands of global industries, NIIT bridges the gap between the sector’s requirements and available talent.

In FY22, NIIT added 16 global customers to its managed training services, taking the count to 66 customers overall, while maintaining a record 100% renewals in the past two years. However, the company registered a negative compounded sales growth of -32% in the past three years and -19% in the past five years.

Also Read: NIIT share price jumps 29% in two sessions after Ramesh Damani, promoters buy stake

EBITDA (earnings before interest, taxes, depreciation, and amortisation) declined to ₹1 crore in FY24 from ₹70 crore in FY19, indicating a substantial weakening in operational profitability. For the year ended March 2024, profit after tax was ₹40 crore, a compounded decline of 15% over the past five years.

The NIIT share price increased 672% to ₹170 on 30 August 2024 from ₹22 in August 2019.

Currently, NIIT is trading at a price to earnings (PE) multiple of 52x, which seems a bit high. The median PE for the past 10 years was 7.6x. The company has a low return on equity (RoE) of 6% for the past three years.

Apart from Damani who recently bought the NIIT stock, Nippon India Small Cap fund holds 8.21% of the company’s total equity. Ashish Kacholia and Suresh Agarwal held 1.86% at the end of September 2023, which they sold between then and March 2024.

Garden Reach Shipbuilders & Engineers Ltd

Overseen by the ministry of defence, Garden Reach Shipbuilders & Engineers is an Indian shipbuilding company. It was the first shipyard in India to export warships and it has delivered 100 warships to the Indian Navy and Coast Guard.

With an order book of ₹23,592 crore as of Q3 of FY24, Garden Reach has the capacity to build 20 warships concurrently. The company has the capability of producing a wide spectrum of ships ranging from 5-tonne boats to 24,600-tonne fleet tankers.

Garden Reach has posted a compounded sales growth of 47% in the past three years and 21% in the past five years. EBITDA increased to ₹234 crore in the year ended March 2024 from ₹42 crore in the year ended March 2019. EBITDA has grown at a CAGR of 40% over the past five years. Profit after tax was ₹357 crore at the end of March 2024, a compounded growth of 26% over the past five years.

Also Read: Garden Reach Shipbuilder share price falls 8.5% in three days. Will it rebound?

The share currently trades at ₹1,843, which is a 1,285% jump over the price of about ₹130 in August 2019.

As for valuations, Garden Reach Shipbuilders is trading at a PE multiple of about 58x currently, with a five-year median PE of 15.2x.

HDFC Balance Advance Fund held 4.91% of the company’s equity as of the quarter ended March 2024, which was lowered to 1.97% in the quarter ended June 2024.

Goldiam International Ltd

Goldiam International is a jewellery supplier specialising in both natural and lab-grown diamonds for global retailers, department stores and wholesalers. Its product range encompasses engagement rings, wedding bands, anniversary rings, bridal sets, earrings and pendants.

The company generates revenue mainly from overseas, with the US accounting for 95% of its income. It also has a presence in markets including the UK, Russia, Dubai, China, Hong Kong and Australia. Goldiam tapped into the Middle East markets in the first quarter of FY24, with an order of ₹30 crore for studded jewellery, which took its order book to ₹110 crore as of the same quarter. It is expected that the order will be executed within four to six months.

The company’s sales have grown at a compounded rate of 14% in the past three years and 7% in the past five years. EBITDA increased to ₹114 crore at the end of March 2024, expanding at a CAGR of 15% from ₹56 crore at the end of March 2019. Profit after tax was ₹91 crore as of March 2024, growing at a compounded rate of 15% over the past five years.

Goldiam shares traded at ₹322 on 30 August, an increase of almost 1,600% from ₹19 in August 2019.

Currently, Goldiam is trading at a PE multiple of 36x. Its 10-year median PE is 8.6x.

Mukul Agarwal, Ashish Kacholia and Divya Vaghela have been past investors in the stock.

Panama Petrochem Ltd

Panama Petrochem is a manufacturer and exporter of petroleum speciality products, offering a diverse portfolio of about 80 variants of liquid paraffin oils, petroleum jelly, ink oils, antistatic coning oil, rubber process oils, transformer oils, and cable filling compounds, among others. It caters to both the domestic and international markets.

The company has a strong client base, including industry leaders such as Hubergroup India Pvt Ltd for inks, Reliance Industries Ltd, Dabur for cosmetics, and ATC Tyre for rubber oils. The company's strong market position is reflected in its customer concentration, with about 26% of its standalone revenue in FY24 generated from its top 10 customers.

Also Read: Ramesh Damani buys more shares of this portfolio stock in Q2

Panama Petrochem has delivered a compounded sales growth of 18% in the past three years and 13% in the past five years. EBITDA increased to ₹253 crore in the year ended March 2024 from ₹100 crore FY19, growing at a CAGR of a little over 20%. Profit after tax was ₹195 crore in FY24, having grown at a compounded rate of 30% over the past five years.

The company’s share price is currently ₹418, which is 515% higher than ₹68 five years ago.

Panama Petrochem is trading at a PE multiple of 12.7x currently, with a median PE of 11.1x over the past 10 years.

Apart from Damani, Anil Kumar Goel holds a 1.24% share of the company’s equity.

Vadivarhe Speciality Chemicals Ltd

Established in 2009, Vadivarhe Speciality Chemicals specialises in manufacturing a varied range of active pharmaceutical ingredients, bulk drugs, specialty chemicals and drug intermediaries. With an annual production capacity of 150 metric tonnes at its Nashik facility, the company sources raw materials locally and from China, serving both domestic and international markets including the UK, the US, Switzerland and Malaysia.

Vadivarhe’s sales have increased at a compounded rate of 15% in the past three years and 4% in the past five years. EBITDA was ₹3.46 crore in the year ended March 2024 compared with ₹2.39 crore in FY19. EBITDA grew at a CAGR of almost 8% over the past five years.

Profit after tax was ₹6 lakh in the year ended March 2024, having declined at a compounded rate of 13% over the past five years. The company’s stock price fell to ₹14 in August 2019 from ₹137 in August 2017. The share traded at ₹65 on 30 August 2024, a 365% jump over the 2019 price.

Currently, Vadivarhe is trading at a PE multiple of 1,385x, which is too big a number by any stretch of imagination. The median PE for the past 10 years was also higher at 51.2x. The company has a very low RoE of a negative 40% for the past three years.

Apart from Damani, Sanjaykumar Harikishan holds 1.64% of the company’s equity.

The Damani Playbook

Among these five key stocks that Damani owns in his portfolio, there are contrasts in terms of market performance over the past five years - from negative sales growth to stock price jumps of over 1,000%. How these stocks perform is something we will have to wait and watch. But the fact that Damani owns them - and only them - in his portfolio makes them look better to his followers and fellow investors alike.

Given that an investor of the calibre of Damani is betting all his odds on just these five stocks, it would be good to keep an eye on them. But do note that Damani’s point of entry into these stocks was far lower than their current prices.

 

Note: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only.

Manvi Agarwal has been tracking the stock markets for about two decades now. During this period, for about 8 years, she was a financial analyst at a value-style fund, managing money for international investors. Presently, she devotes her time to writing on potentially ignored, and/or misunderstood investment opportunities in the Indian stock markets.

Disclosure: The writer or his dependents may or may not hold stocks mentioned here.