Mumbai-based Walchandnagar Industries has a market capitalisation of only Rs 1,550 crore but has been in the limelight for the last two trading sessions – the shares gained over 8% percent on Saturday when the Budget was announced and followed it up with another 6% gains on Monday.
The stock has gained around 52.29 percent over the last one year, beating the Nifty 50 – up 8% -- by a wide margin.
The heavy engineering company that works across sectors including defence, nuclear power, aerospace, and oil & gas has amongst its shareholders marquee names like Ashish Kacholia and Rakesh Kathotia of Subhkam Ventures.
Shares of this small-cap has been gaining steady ground but is yet to be tracked by any of the leading broking firms. We take a closer look at the business outlook of the company, given the huge investor interest in the share price.
What does Walchandnagar Industries do?
Established in 1908, Walchandnagar Industries is a heavy engineering company that works across sectors including defence, nuclear power, aerospace, oil & gas, and industrial products. The company manufactures critical components for defence, core equipments for nuclear power plants and contributes to India's space program as well.
Walchandnagar works with various government agencies including the Department of Atomic Energy (DAE), Nuclear Power Corporation of India Limited (NPCIL), Bhabha Atomic Research Centre (BARC) and Bharatiya Nabhikiya Vidyut Nigam (BHAVINI).
How are the financials of the company?
In Q2FY25, Walchandnagar's revenue was at Rs 73.44 crore, lower by 16.5 percent compared to the same period a year ago. The company reported a PBT loss of Rs 11.03 crore in Q2FY25 against Rs 8.14 crore loss in the previous fiscal.
In the Q2FY25 earnings release, the company said that as part of their strategy, they have been looking to diversify from the EPC business and shift focus to defence & missiles, nuclear, aerospace segment and specialised OEM businesses (gear, centrifugal, crushing & grinding solutions and instrumentation).
The management said that while revenue contribution from their core manufacturing business has reached 87% in Q2FY25 compared to 74% in Q2FY24, the defence & missiles, nuclear, aerospace segment was impacted by delays in receipt of orders from the government.
As of Q2FY25, the company had an order book of Rs 860.77 crore and an order pipeline of Rs 609.44 crore.
Who are the marquee investors in the company?
Well-known veteran investor Ashish Kacholia currently owns around 2.6% stake in the company. He seems to have partially diluted his stake, as per data from Ace Equity, from around 3.17% stake the company in March 2024. The other well-known shareholders is Rakesh Kathotia, founder of Subhkam Ventures. Kathotia owns around 1.17% in the company. Promoters hold around 31.77% stake while public shareholding is around 68%, as per September 2024 shareholding data.
Why is the company in news?
While presenting the Union Budget on February 1, Finance Minister Nirmala Sitharaman announced a slew of measures to promote nuclear energy, including a proposal to develop at least 100 GW of nuclear energy by 2047. She further added that to enable an active partnership with the private sector, amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act will be taken up. Additionally, a Nuclear Energy Mission for research & development of Small Modular Reactors (SMR) with an outlay of Rs 20,000 crore will be set up and at least five indigenously developed SMRs will be operationalised by 2033.
Investment outlook?
Currently, the stock has no coverage from major brokerage firms. Market experts that Moneycontrol spoke to seemed sceptical about the long-term opportunity, and believed that such plays are currently short-term in nature, based on the newsflow.
A veteran trader told Moneycontrol that the December quarter results of the company are awaited, and the recent upswing could be due to expectations of some positive newsflow.
"This is a small company but it has big investors holding it (like Ashish Kacholia). Therefore, if there is a positive news for the industry, then people buy into the stock," the trader said, wishing not to be named.
Smallcase manager Kislay Upadhyaya concurs that Walchandnagar has struggled with ROCE and ROE, like many of the companies in the space. While a negative ROCE is not necessarily a major risk, RoE too is negative, and ROCE has fluctuated between -5% and -3%. "Additionally, the company has had delivery issues," he added.
Experts told Moneycontrol that while nuclear energy presents a lucrative long-term opportunity, the company itself lags behind, even though it could be a major beneficiary of this growth. Experts suggest for long-term investors, it may be wiser to avoid risk, rather than chasing potential short-term gains.
"More efficient start-ups will likely emerge, leveraging better technology and strong government relationships. It is better to wait for credible new players to establish themselves before making long-term investments," said a market participant.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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