Blackstone Advisors exits small-cap stocks

US-based Blackstone Advisors, a leading foreign institutional investor (FII), is exiting some of its small-cap stocks in India, including more than half of its stake in Indo Tech Transformers. Blackstone is selling the stakes in these companies through its Asia and India funds. A senior executive of Blackstone Group said the company has decided to sell stakes to raise cash for various distributions. “Also, we might find other, more attractive names that we need to rotate into. Some sales can also be due to company-specific reasons,” the official said.It is not known whether Blackstone is making profit from the sales, though it is clear that share prices of all these companies have come down significantly in the past one year.In the case of Indo Tech Transformers, the US fund house had bought 86,871 shares on October 27 at Rs 169.90 a share. It has sold nearly three lakh shares in the company in three transactions at an average price of about Rs 302 a share.“The total cost of investment may be higher. The buying seen in October may have been to average the cost,” said a stockbroker. At present, shares of Indo Tech Transformers is about 34 per cent down from their one-year high of Rs 590 in April last year.Prices of Blackstone’s other small-cap holdings have also come down. HBL Power Systems is down to Rs 132 a share from Rs 330 in May last year. Blackstone has liquidated 3.27 lakh shares of the company.In the quarter ended December 31, 2008, Blackstone held 2.72 per cent equity stake (6,60,000 shares) in HBL Power Systems. Blackstone’s name, however, does not figure on the shareholders’ list for the March 31, 2009 ended quarter, indicating that the fund house’s stake has come down to less than 1 per cent.In Sujana Tower, Blackstone, through the India Fund, held 6.20 per cent stake (2,570,767 shares) at the end of December quarter. Last month, the company sold a part of the stake at a paltry Rs 8.44 per share, against the 52-week high of Rs 132.70 on April 22 last year. Octav Investments is another stock from which Blackstone has partially exited. In the October quarter, the fund held 1.56 per cent stake (46,997 shares) in the company, which has now come down to less than one per cent. Share price of the company is at present quoting at Rs 13.32 compared with Rs 650 on August 8 last year. “Our strategy has not changed. We have more exposure to large-cap names and keep some exposure to mid and small-cap names that we believe have the most potential,” the Blackstone official said. Blackstone India Fund’s top 10 holdings at the end of March 31, 2009 include Reliance Industries, Infosys Technologies, Bharti Airtel, Hindustan Unilever, ITC, HDFC, ONGC, BHEL, HDFC Bank and State Bank of India.

Source: Business Standard, Team M&A