Gokaldas Exports shares drop 4% after block deal by promoter entity. Should you buy the dip?

Shares of Gokaldas Exports dropped more than 4 per cent during the early trade on Thursday after a promoter entity reportedly sold a significant stake in the company via a block deal. The data from exchanges suggest that the bulk deal was executed. Business Today could not ascertain the details of the buyer/buyers.

According to the National Stock Exchange (NSE), more than 97 lakh equity shares of the company amounting to Rs 380.27 crore were traded as of 11.15 am. Similarly, over 7.71 lakh equity shares worth Rs 30.30 crore exchanged hands on BSE as of the same time.

According to some media reports, Clear Wealth Consultancy Services, one of the promoters of Gokaldas Exports was likely to sell 40 per cent of its stake through a block deal at a price of Rs 390, a discount of 4 per cent to its previous close at Rs 407 on Wednesday.

On the back of heavy trading volumes, shares of Gokaldas Exports plunged about 4 per cent to Rs 390.10 on Thursday, before making a marginal recovery to Rs 396.50. The textile player was commanding a market cap of a little more than Rs 2,400 crore.

Shares of Gokaldas Exports have delivered a return of 10 per cent in the last one month, whereas the counter is up by 15 per cent in the last six months. It has delivered a return of about 400 per cent in the last five years, the data suggests.

Clear Wealth Consultancy was looking to offload an 8.25 per cent stake through the block deal, said the media reports. Based on the December quarter shareholding pattern, Clear Wealth Consultancy held a 20.56 per cent stake in the company.

Incorporated in 1995, Gokaldas Exports, is the largest exporter of garments in India. The Bengaluru headquartered company manufactures blazers and pants, shorts, shirts, blouses, denim wear, swimwear, active and sportswear.

Gokaldas Exports is also expected to be one of the beneficiaries of the government push on the textile sector and the PLI scheme announced for the same. The government approved 61 companies for the textile production linked incentive (PLI) scheme with investments worth Rs 19,000 crore and an expected turnover of Rs 1.84 lakh crore in five years.

Avendus Spark maintained a 'buy' stance on Gokaldas Exports with a target price of Rs 586, suggesting a 50 per cent upside. Experts estimated FY22-25 revenue and earnings to grow at about 22 per cent and 38 per cent CAGR, respectively. "The company currently has 36 million pieces of garment capacity," it said.

Gokaldas Experts seems to be a classic turnaround on all fronts led by a focus on the end market, increasing the wallet share in existing customers and adding new customers, strengthening manufacturing capabilities with periodic investment, cost optimization and reduction in wastages and fund infusion in two stages, said Phillip Capital.

The outcome of such steps is reflected in consistent revenue growth, gradual margin and strong balance sheet. The steps taken to turn around the company have changed the direction (and perception among customers) of the company, it said in its initiating coverage report with a 'buy' rating and a target price of Rs 582 on the stock.

However, ICICIDirect Research has a 'hold' rating on the stock and it values Gokaldas Exports Rs 440, that is, 14 times FY25E EPS. "Demand headwinds in key markets in H1FY24 could subdue revenue growth. However, we believe GEL is a long-term play in the apparel export space," it said.


(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)

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