Whalesbook
Singhania's Strategy: Buying Out-of-Favor Assets
Founder Sunil Singhania's Abakkus Asset Management has deliberately redeployed capital, investing ₹322 crore into six companies trading at a discount or facing temporary challenges. This contrarian approach, a long-honed strategy of finding overlooked businesses, represents a calculated bet on unlocking value in out-of-favor assets, especially in what is seen as a tougher market. The firm's overall portfolio value exceeded ₹2,740 crore in the March 2026 quarter, providing significant capacity for such value-focused investments.
Focus on Recovery, Not Trends
Singhania's chosen stocks steer clear of popular speculative sectors like Artificial Intelligence, defense, or semiconductors. Instead, they include established companies with operational hurdles and newer firms yet to gain market traction. The strategy centers on finding quality businesses at depressed valuations, anticipating that catalysts such as operational turnarounds, margin recovery, or market re-rating will drive future returns. This approach aims to capitalize on market inefficiencies that punish companies for short-term issues over long-term prospects.
The Six Companies Targeted
The new stakes are spread across Abakkus's Flexi Cap Fund, Growth Funds II, and Four2Eight Opportunities Fund. The companies are Heritage Foods (dairy/FMCG), Sejal Glass (architectural glass, post-NCLT), Arvind Fashions (apparel retail), Avalon Technologies (EMS), Cyient DLM (EMS with aerospace and defense focus), and Aye Finance (MSME lender). Significantly, five of these six stocks trade well below their recent highs, and four have faced difficult operational periods. Sejal Glass, Cyient DLM, and Aye Finance, in particular, experienced specific negative events—turnarounds, weak quarters, or subdued IPOs—that depressed sentiment and created the entry points Singhania seeks.
Heritage Foods: Margin Pressure Amid Value-Added Growth
Abakkus's Flexi Cap Fund took a 1.4% stake in Heritage Foods Ltd., worth ₹47 crore. The company reported record revenue of ₹4,135 crore in FY25, with its Value Added Products (VAP) segment contributing 40% of revenue. However, recent Q3 FY26 results revealed margin compression driven by higher milk procurement costs. The stock, down about 26% year-to-date in 2026, trades at a P/E of 21x, below its 10-year median of 25x and the industry median of 26x. Despite these pressures, the strong VAP shift, brand recognition, and low debt offer potential upside, although inconsistent Return on Equity (ROE) remains a concern. ICICI Securities and ICICI Direct rate the stock 'hold'.
Sejal Glass: Recovery Post-NCLT Fueled by Middle East Demand
Abakkus Growth Funds II acquired a 4.4% stake in Sejal Glass, valued at ₹38 crore. After exiting NCLT proceedings, the company reported strong sales growth, reaching ₹396.5 crore in FY26, primarily driven by international revenue (74% from the Middle East). Profit after tax surged 162.2% to ₹28.74 crore in FY26. The stock has seen a significant rally, gaining 4,912% since its December 2021 listing, largely representing a recovery from a distressed position. Its P/E stands at 31x, below the industry median of 39x, though its stock price is high relative to book value. Potential concerns include a decline in promoter holding and the sustainability of NCLT recovery gains. Sejal Glass forecasts 25% revenue growth in FY27 and expects margin expansion from specialized glass products.
Key Stakes in Other Firms
Abakkus also acquired stakes in Arvind Fashions (1.03%, ₹62 crore), Avalon Technologies (1.16%, ₹81 crore), Cyient DLM (1.95%, ₹58 crore), and Aye Finance (1.10%, ₹37 crore). Avalon Technologies, an Electronic Manufacturing Services (EMS) firm, trades at a P/E range of 68.3x-80.03x with a market cap of approximately ₹7,614 crore. Cyient DLM, focused on aerospace and defense, has a P/E of 45.91x and a market cap of ₹3,153 crore. Arvind Fashions, a retail brand aggregator, trades at a P/E of 34.67x with a market cap of ₹6,070 crore. Aye Finance, a Non-Banking Financial Company (NBFC) serving MSMEs, has a P/E of 18.04x and a market cap of ₹3,715 crore.
Market Context and Valuations
Singhania's strategy contrasts sharply with the high valuations common in thematic tech stocks. In early May 2026, the broader market showed cautious sentiment, with the Nifty trading around 24,176. While IT and FMCG sectors outperformed, Abakkus focused on value in lagging segments. The EMS sector, where Avalon and Cyient DLM operate, is highly competitive. Avalon Technologies, with a market cap around ₹9,260 crore, trades at a high P/E of 68.3x. Analyst targets, such as Macquarie's ₹1,350, suggest potential upside despite these valuation concerns. Cyient DLM, with a market cap of ₹3,363 crore, has a P/E of 45.91x, appearing expensive against its industry's average P/E of 34.1x. In apparel retail, Arvind Fashions, valued at ₹6,070 crore market cap and trading at a P/E of 34.67x, seems reasonably valued compared to peers like ABFRL (55x P/E) and Trent (60x P/E). Aye Finance, in the NBFC sector, shows a more modest valuation at ₹3,715 crore market cap and 18.04x P/E.
Risks and Downside Potential
These concentrated investments in companies facing operational issues and market neglect carry significant risks. Heritage Foods' profits can be affected by volatile milk prices and supply chain issues. Sejal Glass, though out of NCLT, operates in the cyclical construction materials sector where demand can vary. Its high valuation multiples post-recovery may not be sustainable without sustained aggressive growth. For EMS firms Avalon Technologies and Cyient DLM, intense competition and potential margin pressures from raw material costs or changing client demands are threats. Avalon's high P/E of over 68x indicates high expectations, making it vulnerable to any growth slowdown, as highlighted by Antique Stock Broking's 'Hold' rating due to valuation concerns. Cyient DLM, at a 42.56x P/E, is also viewed as expensive for its industry. Aye Finance, in the MSME lending sector, faces risks from asset quality, regulatory shifts affecting NBFCs, and the inherent credit risk of its borrower base, amplified by its relatively high beta of 2.06. Aye Finance's subdued IPO subscription suggests market skepticism, a factor Singhania is betting against.
Analyst Views and Outlook
Singhania's strategy relies on the long-term re-rating of these neglected assets. The effectiveness of this approach will be tested in the coming quarters as these companies pursue their recovery or growth plans. Analyst opinions vary on some of these stocks. For example, Antique Stock Broking maintains a 'Hold' on Avalon Technologies with a target of ₹1,213, citing valuation concerns, while Prabhudas Lilladher also has a 'Hold' with a target of ₹1,233. Macquarie, however, raised its price target for Avalon to ₹1,350. Heritage Foods carries 'hold' ratings from ICICI Securities and ICICI Direct. The success of Abakkus's portfolio ultimately depends on its ability to accurately identify and benefit from fundamental improvements before the wider market catches on.