Why these two midcaps are suddenly hot?

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Why these two midcaps are suddenly hot?

Investment Analyst, Ashish Chugh gives his top two picks in the midcap space--Alumeco India Extrusion and Country Club (India) Ltd.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets

Investment Analyst, Ashish Chugh gives his top two picks in the midcap space-Alumeco India Extrusion and Country Club (India) Ltd.

Excerpts from CNBC-TV18's exclusive interview with Ashish Chugh:

Q: What is Alumeco India Extrusion all about?

A: Alumeco is a Hyderabad based company. This company was earlier called Pennar Profiles Limited. This company is involved in the manufacture of aluminium extruded products, which are mainly used in construction, automobile and the engineering industry.

This company was earlier having problems because of the huge debt in the balance sheet. Last year they negotiated a one-time settlement with lenders, where in they paid about 53% of the outstanding principal. The balance principal along with interest and penal charges has been waived off. This has made the balance sheet of the company almost debt free. The debt has come down from about Rs 45 crore to about Rs 4 crore.

Another big development in Alumeco is that there has been a change in the management control. This company has been taken over by Alumeco Group of Denmark. Alumeco Group in Denmark mainly operates in Northern Europe and they have a turnover of close to 1 billion Danish Krones. After the takeover, they infused more capital into the company, and they have also taken preference shares in the company.

The takeover by Alumeco will help Alumeco India to procure its raw material at more competitive prices because of the scales. In future, we may see Alumeco infusing more capital into the company and they may make India a sourcing base because of the cost advantage. So here is a company, which has now been taken over by a multinational, which is a leader in its field in Europe.

It is a good company for investors who believe in catching companies, when the visibility of earnings is not there. So the risk in investment in these companies is high, but the price is very attractive. Prices have dropped by more than 50% over the last one month. At Rs 30, the downside looks limited and it could be a good long-term bet.

Q: Any disclosures on this one? Do you own this stock?

A: No, I don't own Alumeco India.

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