We had significantly pruned down our position in GAEL a few quarters back when it was posting cyclically high margins while a coffee can fund was bidding up the price & valuation on that unsustainable annual profitability of Rs 500 Cr. The said fund realized the cyclicality of this business within a couple of quarters and exited the stock. Meanwhile, the cycle kept getting worse with the Agro segment posting losses for consecutive quarters in a row. In the core segment of Maize - The elevated margins due to high spreads i.e. cheap maize inventory & high realization of starch due to the Russia-Ukraine war, have normalized too. The business is back to normalized profitability and could have made a new quarterly base profit of Rs 50-75 Cr.

We are upgrading GAEL back to buy while keeping position size at a low level only. We will issue a separate notification in case of price/time correction providing an opportunity to increase allocation.