According to a recent filing with the SEC, Karthik Sarma‘s SRS Investment Management has hiked its stake in Ehi Car Services Ltd (ADR) (NYSE:EHIC) to about 8.33 million shares. The holding, which is valued at $108.37 million according to the current price of shares, represents about 15.3% of the company’s outstanding shares and includes 333,334 Class A shares held in the form of American Depository Shares (ADS).
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The New York-based hedge fund SRS Management was established by Sarma in 2007 after he worked as a senior investor at Tiger Global for about five years. The fund has a special focus on equity markets outside the U.S., which includes India, China, and South Korea. The market value of the fund’s public equity portfolio stood at $2.53 billion at the end of the first quarter, with the technology sector representing 34% of the holdings.
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The development comes on the heels of a securities purchase agreement that SRS Investment signed along with Chase Coleman‘s Tiger Global Management in May. The contract detailed a purchase of some 11.44 million shares by the two funds and an additional 10.90 million shares to be acquired later, the issuance of which was approved in the general meeting of shareholders on June 30. In a recent filing, Tiger Global also increased its stake in the company to 30.5% of its outstanding shares. The two funds have prior experience when it comes to investing in car-related companies as Tiger Global is a significant stockholder of Didi Kauidi, and SRS Management owns more than 9% of Avis Budget Group.
The car rental business has unique constraints in that it cannot grow too fast, otherwise it will have to bear the cost of a quickly-depreciating fleet, as well as more free cars when demand rolls down. However, Ehi Car Services Ltd (ADR) (NYSE:EHIC) has the advantage of possibly leasing these to the ride-hailing services Uber and Didi Kuaidi.
The $818 million holding company provides rental vehicles through its subsidiaries eHi Rental and eHi Jiangsu, and chauffeur services through its subsidiary Shanghai Smart Brand Auto Driving Service. Ehi Car Services Ltd (ADR) (NYSE:EHIC) is China’s second-largest car rental provider according to 2013 revenues and has over 1,200 service locations throughout the country. Since its IPO in November of last year, Ehi Car Services Ltd (ADR) (NYSE:EHIC)’s stock has appreciated by about 11.37%, while a major surge has occurred this year, resulting in an appreciation of almost 60% year-to-date. In contrast, the rental and leasing services industry has slid by 1.89% so far this year. The company posted spectacular results for its first quarter, which included a 60% rise in revenues to $47.7 million on a year-over-year basis and a profit of $600,000 as compared to a loss of $2.87 million in the same quarter a year earlier.
Despite its eye-popping returns, Ehi Car Services Ltd (ADR) (NYSE:EHIC) hasn’t been able to gain much traction from the professional money managers tracked by Insider Monkey. Among over 700 hedge funds that we track, just four had investments in the company totaling about $9.66 million at the end of March, as compared to five funds with $9.09 million in shares at the end of the previous quarter. The two other investors of the company apart from SRS Management and Tiger Global are Mark Kingdon’s Kingdon Capital, and Israel Englander‘s Millennium Management with stakes of 488,100 shares and 105,900 shares respectively.
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