Bajaj Consumer soars 20% after promoters sell stake to pare debt

NEW DELHI: Shares of Bajaj Consumer Care hit its upper circuit limit in Wednesday’s trade after a host of mutual funds lapped up shares offloaded by its debt-ridden promoters.

The development eased concerns over high-promoter level debt.

Following the development, the stock jumped 20 per cent to Rs 234.65 on BSE. There were over 3.5 lakh pending orders for the stock on the exchange.

Bajaj Resources, a promoter of the company, offloaded around 22 percent stake in the company for Rs 628 crore through an open market transaction on Tuesday.

Aditya Birla Sun Life Mutual Fund, ICICI Prudential Mutual Fund, HDFC Mutual Fund and Steinberg India Emerging Opportunities Fund were among the buyers.

The promoters will utilise the fund to repay promoter’s personal debt and majority of promoter’s pledge will come down after this stake sale.

Macquarie has retained its ‘outperform’ rating on the stock with a target at Rs 592.

It values the stock at 12 times FY21 earnings.

Other analysts are also bullish on the stock. About 20 broking firms that cover the stock expect it to touch Rs 398 in a year. Shares of Bajaj Consumer declined 15 per cent on Tuesday to close at Rs 195.55.

The stock is trading at an attractive relative valuation of mere 13 times its trailing 12 months earnings. Its peers like Godrej Consumer, Dabur, Emami and Mario are all trading at a PE between 33 and 45, ET reported.

As of September 30, 2019, Bajaj Resources, a holding company of Kushagra Bajaj, held 60 per cent stake in Bajaj Consumer Care, of which 62.83 per cent was pledged with the lenders.