Heard on the Street: KS Oils stock takes a beating as institutions go on selling spree

The sharp fall in KS Oils over the past two weeks has caught investors on the wrong foot, after they accumulated its shares following a "buy" report by foreign broking firm Nomura. The stock was recommended when it was trading at 18. "Most risks were being built in the stock at current levels and it is trading at a 50% discount to replacement value of assets," said the broking firm in the report dated June 28, 2011. While the stock surged 20% following the report, it has since taken a 50% beating, including Tuesday's 32% crash.

KS Oils touched a 52-week low of 8.40, before ending at 8.60 on the BSE. There was buzz that financiers have been selling some of the pledged shares due to margin pressure. Adding credence to the market talk was late evening disclosures on bulk deals transacted in KS Oils through which a few institutional investors sold a huge quantity of the company's shares in the open market. According to disclosures filed with the NSE and BSE, Edelweiss Finance, SICOM and L&T Finance sold 1.2 crore shares, 63 lakh shares and 57 lakh shares, respectively.

They together offloaded 2.4 crore shares, or 5.6% of the equity capital, while over seven crore shares traded on the two stock exchanges on Tuesday. In the past, many large foreign institutional and private equity investors bought stakes in KS Oils, a manufacturer of edible oils. Two PE investors, NSR Direct and Baring, owned 9.5% and 5% stake, respectively, while FIIs like Morgan Stanley, Merrill Lynch and Macquarie Bank held a 1-2% stake in the company as on June 30, 2011.

Contributed by Harish Rao