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The battle for the control of M P Birla group is on but it seems that financial institutions are hardly perturbed by this. FIs are bullish about the prospect of M P Birla flagship Birla Corporation Ltd.
Life Insurance Corp and Unit Trust of India, two biggest operators in the country are holding on to their position in BCL despite a healthy appreciation in the counter in last three months.
This has assumed significance because the entire holding of UTI in Birla Corporation is in the accounts of US 64, which is now under UTI 1. The outfit controls US 64 assets and MIPs of former UTI.
The general principle of UTI 1 is to book profit whenever possible as it deals with schemes that are supposed to be phased out over a period.
The counter has witnessed brisk activities in the last few weeks with price touching new highs every day. It has seen an appreciation of over 170 per cent in last five months from a level of Rs 48.70 in April 2004 to Rs 140 on Wednesday.
The average volume is around 200,000 in Bombay Stock Exchange and National Stock Exchange. Interestingly, UTI-1 has stopped selling Birla Corp since August 2004. LIC too have not booked profit from this counter in last few weeks.
Incidentally, the entire holding of UTI in BCL was in the accounts of US 64.
UTI-1 currently holds around 4.3 per cent in the company. Top sources in UTI-1 informed that the institution sold few BCL in July. But after that they have stopped selling BCL.
"We are not selling BCL as we believe that it has the potential of further appreciation. We are not connecting the back room drama with the company performance," sources in UTI -1 said. A leading broker of NSE, who operates for LIC, shares the same idea.
"LIC has not sold BCL in last few weeks," he added. LIC presently have around 6.13 per cent in BCL. According to sources, both the faction looking for control has bought BCL from market in last few weeks.
Experts feel that the confidence of the financial institutions on BCL is because of good performance and its high exposure to cement.
The company has booked profit of Rs 29 crore (Rs 290 million) in the first quarter of 2004-05. BCL has booked the highest net profit of Rs 41 crore (Rs 410 million) in recent years in 2003-04.
Cement constitutes around 87.43 per cent of the turnover of Birla Corp. The cement division of the outfit clocked a turnover of Rs 1087 crore (Rs 10.87 billion) in 2003-04 compared to Rs 997 crore (Rs 9.97 billion) in 2002-03.
According to BCL officials, the capacity utilization is improving in the cement division with Durgapur unit touching 102 per cent capacity utilisation.
The cement production recorded a similar growth and increased to 47.70 lakh (477 million) tonne as compared to 45.57 lakh (455.7 million) tonne in the previous year.
The former president of the Calcutta Stock Exchange and stock analyst, Ajit Dey, said investors were buying BCL because of its exposure in cement.
"Mostly the investors are taking positions in Birla Corp because of the overall positive outlook about the cement industry," Dea said.
Former broker director of CSE, Bijoy Agarwal, agreed. Agarwal said BCL stock was attracting investors because of cement and its improved performance in the last fiscal as well as in the first quarter of the current financial year.