1. PB Fintech (Policybazaar): On June 6, 2022, the stock price of this insurance aggregator nosedived nearly 12% after its promoter announced plans to sell 37.7 lakh or 0.84% stake in the company. Notably, this stock has lost over 60% of its value from its life-high achieved in November 2021.

PB Fintech’s co-founder Yashish Dahiya held an 11.3% stake in the company back in June 2020 i.e., in the pre-IPO era. His holdings stood at 5.45% as of May 2022 and reduced further to 4.6% post the share sale executed on June 7. According to the official statement, Dahiya seeks to meet his tax obligation arising out of the exercise of employee stock options through this sale deal. Previously in February 2022, the other cofounder Alok Bansal cited a similar reason while selling a 0.6% stake in the company. However, this failed to placate the concerns of investors. Under employee stock option plans, shares of a particular company are granted to key personnel at a very low strike price, generally close to the face value of the share. So, while promoters made a big profit in these deals, retail investors have lost money in PB Fintech ever since its listing. The recent financial performance of the company is also nothing to cheer about.

PB Fintech’s net losses magnified 5.5X YoY to Rs 833 crore in FY22 with its operating cash flows sliding into negative territory. While its topline grew over 60% YoY in FY22, advertising and employee expenses as a % of sales grew sharply by 20%. Moreover, the company's overall contribution margins fell continuously over the last 5 quarters owing to the business initiatives. The new-age startups are clearly playing the greater fool theory quite well. (This theory basically means that investors buy overvalued securities believing that there will be a greater fool willing to pay an even higher price for the same).

2. Bata India: This footwear retailer’s stock fell over 8% in the last seven trading sessions after its promoters sold a 2.8% stake on June 1, 2022. However, mutual funds increased their holdings in Bata India in the past month. As a result, it shows up in this screener that lists stocks where mutual funds have raised their stakes.

Promoters selling their stake in the company come at a time when it is facing challenging times in terms of revenue growth due to the Covid 19 pandemic. This is reflected in Bata India’s revenue CAGR over FY18-FY22, which stands at -6.6%. However, the company is on a recovery path in FY22. Its revenue rose 12.8% YoY to Rs 684 crore in Q4FY22 and profit jumped 2.1 times to Rs 65 crore. Despite strong YoY growth, both revenue and profit missed Trendlyne’s Forecaster estimates. Operating profit margin rose 5.4% YoY to 24.4% on the back of price hikes and operational efficiencies. Sneakers and casual segments led revenue recovery while the kid’s footwear segment still struggles to grow, according to the management.

The company plans to leverage the franchise model to grow in tier two and three cities, where the unorganized players’ market share is higher. In addition, Bata is also expanding its footprint through multi-brands footwear shops. Going forward, the execution of this aggressive expansion will be a key determining factor for growth, and the success of this strategy is currently unclear. As a result, brokerages have different takes on this stock. While HDFC Securities maintained its ‘Sell’ rating, Axis Securities has a ‘Buy’ rating.

3. Mangalore Refinery And Petrochemicals (MRPL): This petrochemical stock rose 20% on Tuesday and was locked in the upper circuit for the third consecutive day. The stock surged 9% touching a 52-week high, on Wednesday. The share price doubled in less than six months delivering a 140% return on the stock. Its Q4FY22 results have also been off the charts as it records a net profit growth of 8.2X YoY to Rs 3,008.2 crore. It beat Trendlyne Forecaster’s net income estimate by 44.7%. The rise in profit was because of higher crude output and improving gross refining margin (GRM). Its capacity utilization increased to 116.9% in Q4FY22 as compared to 107.5% in Q4FY21. With a continuous increase in capacity utilization, refining output will remain strong and generate revenues for the company.

Because of the recovery in demand for crude oil, its revenue from operations increased 36% YoY to Rs 28,227.8 crore. This is also because MRPL took certain initiatives to improve revenue from marketing margins through domestic demand and exports. Analysts from ICICI Securities expect MRPL to report healthy earnings in the near term because of a favorable global refining scenario. The brokerage expects GRM to increase to US $12 per barrel in FY23.

The surge in Brent crude prices to above $124 per barrel and WTI crude prices above $122 per barrel also bodes well for this stock. Reports suggest that with the ongoing conflict in Europe, supply concerns remain a major problem but with increasing GRMs, MRPL stands to gain the most from the situation.

4. Life Insurance Corporation of India (LIC): This life insurance stock is falling for the last seven consecutive sessions. It hit an all-time low, twice, on Thursday. The stock is now down 25% from its IPO issue price of Rs 949. The street is abuzz with talk of the stock falling continuously since its listing and eroding more than 25% of its market cap value. During the time of its listing, LIC’s market cap was around 6 lakh crore, which fell to 4.6 lakh crore within a month of its listing. The loss in value is equivalent to the market cap of companies like Tata Motors and JSW Steel.

It might not just be an overall bearish sentiment that is hitting the stock. In the last week of May, the company released its Q4FY22 results and the numbers were not very impressive, despite LIC being the market leader in the life insurance space. It reported a fall in net profit by 18% YoY to Rs 2,371.6 crore. Its new business margins were low and a lot of analysts do not see much growth potential. Emkay Global gives a ‘Hold’ rating for the stock as it believes that LIC has limited scope in product and channel distribution.

However, not everything is negative for LIC.  It has a competitive edge over other private players - the company has a large network of agents with a good distribution network and it can work on improving its new business premiums and margins to retain its elephant’s share in the market.

5. Cyient: This technology solutions company’s stock rose by 5% on Monday after it announced the acquisition of Celfinet, a wireless engineering services company. The company will be acquiring Celfinet for a total cash consideration of 41 million euros (Rs 342.2 crore). This is the company’s third acquisition so far in FY23 and the total cost of these acquisitions is $181.8 million (Rs 1,413.1 crore).

These acquisitions were all-cash deals as the company has a healthy cash position of Rs 1,569 crore in FY22. The company’s net profit in Q4FY22 also rose by 17% QoQ to Rs 154.2 crore driven by the services business. It beat Trendlyne’s Forecaster estimates by 21.4%. The company shows up on a screener of companies with rising net profit QoQ for the past four quarters. 

So far the acquisitions in FY23 are in line with the company’s long-term strategy to diversify its segment revenue and geographical revenue mix. Cyient is looking at acquisitions that build scale in its existing business verticals where it does not have a geographical presence. According to reports, the company has focused on expanding in Europe and Japan.

Among the three companies acquired, two are from Europe, namely Citec and Celfinet. Citec is a plant and product engineering services company mostly catering to the energy sector in Europe. Cyient also acquired Singapore-based Grit Consulting, which provides consulting services to mining and energy companies. Currently, the communication and utilities segment makes 28% and 7% of the segment revenue mix of the company. Through these acquisitions, Cyient management expects to increase its revenue contribution from the two business segments by expanding its global presence.

Trendlyne's analysts identify stocks that are seeing interesting price movement, analyst calls, or new developments. These are not buy recommendations.