It is a peculiar state of affairs that while the ace stock picker of a broking house publicly recommends a buy on a stock, the broking house does the opposite and sells the stock.
We saw this earlier in the case of HSIL. Though Daljeet Kohli recommended a buy of HSIL, his employer, IndiaNivesh Securities, did the opposite and sold off the stock. The sale was providential for IndiaNivesh because the stock crashed thereafter though members of the public who bought the stock on Daljeet’s advice were stranded.
The same situation can be seen with regard to the holdings by Ambit Corporate Finance in DCB Bank Limited. Ambit is Saurabh Mukherjea’s direct/ indirect employer.
Saurabh Mukherjea is/ was very bullish about DCB Bank’s prospects. In a televised interview between him and Narsee Munjee, the Bank’s Chairman, Saurabh meticulously emphasized all the positive factors about DCB Bank and recommended that the stock be bought. He said that there are a couple of “quite unique things” about the Bank and that it would give “good returns going forward”.
In another interview of April 2014, Saurabh said that DCB Bank has/ had the “greatest potential”. He called it a “well-run bank” and said “there is plenty to play for as far as DCB is concerned”. He also explained that DCB’s cost income ratio stands at 62-63%, compared to say 48% for HDFC Bank, and that by simply utilising the capital better, DCB could become a 15-16% ROE bank, which would it take it closer to 1.5-1.6 times book. “So it is a good bank, well-run by a CEO who took charge four years ago” Saurabh added.
However, Ambit Corporate Finance did not share Saurabh’s optimism about DCB Bank’s prospects. Instead, they went about systematically paring their stake in DCB Bank.
As of 01.01.2014, Ambit held 105,34,730 shares of DCB Bank, constituting 4.21% of its equity. This was reduced to 1,04,72,867 shares as of 01.04.2014. During the financial year 2014-15, Ambit sold 26,63,867 shares and reduced its holding to 78,09,000 shares as of 31.03.2015.
| Holding of Ambit Corporate Finance as of 01.04.2014 | 104,72,867 | ||
| 29-08-2014 | Market Sale | (-) 140,000 | |
| 30-09-2014 | Market Purchase | 140,000 | |
| 31-10-2014 | Market Purchase | 900 | |
| 21-11-2014 | Market Sale | (-) 193,500 | |
| 28-11-2014 | Market Sale | (-) 356,400 | |
| 05-12-2014 | Market Sale | (-) 424,800 | |
| 12-12-2014 | Market Sale | (-) 296,200 | |
| 19-12-2014 | Market Sale | (-) 885,500 | |
| 31-12-2014 | Market Purchase | 60,633 | |
| 09-01-2015 | Market Sale | (-) 130,000 | |
| 16-01-2015 | Market Purchase | 282,000 | |
| 23-01-2015 | Market Sale | (-) 125,000 | |
| 30-01-2015 | Market Sale | (-) 396,000 | |
| 20-03-2015 | Market Sale | (-) 200,000 | |
| Holding of Ambit Corporate Finance as of 31.03.2015 | 78,09,000 | ||
Ambit’s systematic selling has continued thereafter as well. As of 30.06.2015, the holding was reduced to 73,09,300 shares. As of 30.09.2015, the holding stands further reduced to 54,59,000 shares comprising 1.93% of the equity.
This means that in the period from 01.01.2014 to 30.09.2015, Ambit sold 50,75,730 shares and reduced its holding from 4.21% to 1.93%.
This suggests that Ambit had lost confidence in DCB Bank’s prospects even though Saurabh Mukherjea was gung ho about its prospects.
As it turned out, the decision by Ambit to sell its holding was a sensible one. We saw earlier how the stock tumbled 20% yesterday and 13% today. Most research analysts now have a sell rating on the stock.
It will be interesting to know who in Ambit offered advice contrary to what was offered by Saurabh Mukherjea. That person must be an ace stock picker in his own right.
It will also be interesting to see what Saurabh Mukherjea’s views about DCB Bank are now and whether he is still as bullish!
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