The Inside Story of Rekha Jhunjhunwala’s Rs 230 Crore Deal with Tata Chemicals for Rallis India Shares

 

If you are interested in the stock market, you might have heard of the name Rakesh Jhunjhunwala, the billionaire investor who is often called India’s Warren Buffett. But did you know that his wife, Rekha Jhunjhunwala, is also an ace investor who holds stakes in several companies?

One of them is Rallis India, a subsidiary of Tata Chemicals and a part of the Tata Group, which is engaged in the business of crop protection products, seeds and plant growth nutrients. Rekha Jhunjhunwala had a 7.75% stake in Rallis India as of June 30, 2023, according to the latest shareholding pattern.

However, on July 18, 2023, she sold a 5.5% stake, equivalent to 1.06 crore shares, in the company via a block deal on the National Stock Exchange (NSE) at an average price of Rs 215.54 apiece. The deal was worth Rs 230 crore.

Who bought the shares? It was none other than Tata Chemicals, the parent company of Rallis India, which increased its shareholding in the subsidiary from 50.06% to 55.04% by acquiring 97 lakh shares or 4.99% of the paid-up share capital of Rallis India at an average price of Rs 215.05 per share.

Rekha Jhunjhunwala still holds 43.75 lakh shares or 2.25% stake in Rallis India after the deal.

Why did Rekha Jhunjhunwala sell her stake in Rallis India?

The reason behind Rekha Jhunjhunwala’s decision to sell her stake in Rallis India is not known yet. However, some possible factors that might have influenced her are:

• The performance of Rallis India in the June quarter was not very impressive. The company reported a marginal fall in net profit at Rs 63 crore on lower income compared to Rs 67 crore in the same period last year. The total income fell to Rs 765 crore from Rs 867 crore year-on-year.
• The crop care business of Rallis India has been affected by high market inventories, steep price drops and delayed onset of monsoon. The company’s CEO Sanjiv Lal said that they remain cautious about the international market demand recovery during the second half of the year once the inventory situation gradually eases out.
• The valuation of Rallis India might have seemed attractive to Rekha Jhunjhunwala as the stock has gained over 50% in the past one year and was trading near its 52-week high of Rs 223.90 on July 18. She might have decided to book profits and exit partially from the company.

What does this deal mean for Tata Chemicals and Rallis India?

The deal between Rekha Jhunjhunwala and Tata Chemicals shows that the parent company has confidence in its subsidiary and is willing to increase its stake in it. Tata Chemicals said that the acquisition was done as part of its long-term strategy to consolidate its position in the agri-solutions space.

Rallis India is one of the leading players in the crop protection industry in India and has a strong presence in domestic and international markets. It has a diversified product portfolio that includes herbicides, insecticides, fungicides, plant growth regulators and seeds1.

The deal might also indicate that Tata Chemicals expects Rallis India to perform better in the coming quarters as the domestic market sentiments are positive with the recent uptick in monsoons. The company might also benefit from its ongoing capacity expansion projects and new product launches.

The deal might also boost the investor confidence in Rallis India as it shows that a reputed institutional investor like Tata Chemicals is bullish on its prospects.

How did the market react to the deal?

The market reacted positively to the deal as both Rallis India and Tata Chemicals shares gained on July 19, 2023. Rallis India shares rose by 4.09% to close at Rs 229.05 on NSE while Tata Chemicals shares rose by 1.71% to close at Rs 1014.95 on NSE.

The deal also generated a lot of buzz among the market participants as Rallis India witnessed a high trading volume of over 1.5 crore shares on NSE, which was 15 times its 30-day average volume.

The deal also attracted the attention of other investors who might be interested in Rallis India or Tata Chemicals as potential investment opportunities.

Conclusion

The deal between Rekha Jhunjhunwala and Tata Chemicals was one of the biggest block deals in the Indian stock market in recent times. It reflected the changing dynamics of the crop protection industry and the strategic vision of the Tata Group. It also showcased the investment acumen of Rekha Jhunjhunwala, who is often overshadowed by her husband but is a savvy investor in her own right.