powerfulpicks stock opinion: There was unexpected news on Pipavav on Oct 1, which caused the stock to tank nearly 10-11%. Pipavav Chairman Nikhil Gandhi confirmed that the sudden fall in prices was due to a few private equity firms selling their stake in Pipavav Shipyard because the lock-in period after IPO (Sep 2009) for founder (pre-IPO) investors in the stock ended on Friday, Oct 1, 2010 and since they had received nearly 3 times returns in less than 3 years, they decided to book some profits. New York Life Insurance (4%), Indus Capital, Trikona Capital, Standard Chartered Private Equity and Citadel Mt Tradng (3.45%) are among companies holding 100 million shares, which would be about 12%, he added. But it was not immediately clear who was selling the stakes. Pipavav has risen over 59% in 1-year, whereas competitors, ABG Shipyard has risen 14.7% and Bharati Shipyard has fallen 5%.
Pipavav has a strong support at 84 and then at 76. I do not see going down below 76 under current market conditions. New buyers will be coming in at those prices because it will start to look quite attractive below 80. If I was a Pipavav share holder, I would hold for some time and average a small bit around 84, then a bit around 80, then around 76-77 and so on. Aim will be to bring my average price below Rs 90, which will give me a cushion to exit when the bounce back happens. If market conditons are right, Pipavav may bounce back to 95 in a few weeks.
Over-pledging of shares to raise money is not a good sign, but I do not think the pledging of Pipavav shares by holding company, the SKIL group will have much of a negative effect on its price.
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