Stock Review: Networth Stock Broking

Jupiter South Asia, Mavi Investment & Geeta Holdings Seen Major Sellers

 

A GROUP of investors — foreign institutions and wealthy individuals — have offloaded a sizeable chunk of their shareholding in Networth Stock Broking, through open market transactions in the past few days. The sellers include Kolkata-based brokers Ajay Kayan and Utsav Parekh.

   According to two people familiar with the matter, these investors had written to the promoters, offering their shares to them since the promoter group had the first right of refusal. The investors wanted to exit the company, because of its poor performance.

   When contacted, SP Jain, the promoter of Networth Stock Broking, confirmed that the investors had written to him, adding that the promoter group had declined the offer. The promoter group lead by SP Jain holds close to 32% in the broking outfit.

   The broking firm reported a net loss of around . 8.5 crore for financial year 2009-10, and a net loss of . 3.5 crore for the quarter ended June 2010. The stock has been witnessing a flurry of block deals of late. Bulk deal data on stock exchanges show Jupiter South Asia Investment Company, Mavi Investment Fund and Geeta Holdings, which held a 2-5% stake in the company as on September 30, 2010, as major sellers.

   On Monday, the stock jumped 13% to close at. 61. According to brokers tracking the company, Networth, like most mid-sized broking firms, has been struggling to grow its revenues for some time now, never having recovered from the market downturn in 2008.

   According to company insiders, the board will be meeting shortly to take some "strategic" decisions. They added that the company would appoint a new director, to replace former chairman R Sankaran, who quit his post in August this year.

   Hemendra Kothari-promoted DSP HMK Holdings, a group of strategic investors, and two FIIs – Mavi Investment Fund (MM Warburg [Schweiz]) and Peninsular South Asia Investment Company (South Asia Access Fund) --had picked up a 31% stake in Networth Stock Broking through a preferential issue of equity shares and convertible warrants in 2007. The preferential issue has been subscribed at 131.40 a share.

   The capital was primarily to be used towards increasing the margin capital requirements in the broking business, scaling and upgrading the technology infrastructure, expansion of the branch network, besides strengthening the wealth management and advisory verticals.