Investors can't exit a penny stock that rose 16,000%
Mumbai: Many investors are finding it difficult to exit from the little known Ahmedabad-based paper company Kushal Tradelink, which has been the best performing stock in the last three years. Kushal shares have been hitting the 2% lower circuit since January 25 after BSE put it in the trade-to-trade category for unusual trading. The stock has produced eye-popping returns of 16,000% since August 2013.
The market capitalisation of Kushal, which stood at Rs 45 crore on August 8, 2013 rose to Rs 7231 crore as on January 24 this year. The stock surge went relatively unnoticed among the wider sections of investors as the company is not tracked by analysts at brokerages.
The company posted consolidated net sales of Rs 1,589 crore in 2015-16 as against Rs 433 crore in 2014-15. In 2013-14, net sales were Rs302.5 crore. Net profit soared 1420% to Rs98.9 crore in 2015-16 compared with Rs6.5 crore the previous year. The sales and profit growth, however, did little to trigger analysts’ curiosity in the company amid chatter that a few Gujarat and Mumbai operators were involved in the stock’s dizzy ascent.
Market watchers said these operators indulged in circular trading to push up the share price.
"The stock was complete Satta," said S P Tulsian, independent equity advisor. "There is nothing financially to justify the rally. Before January 24, there were buyers for several lakhs of shares now selling 100 shares is difficult. This bares it all."
The market is agog with speculation that many high net worth individuals were lured into buying the stock on the promise of 2% monthly interest against assured investment sum in the stock. The only condition was that no shares were to be sold till instructed.
On several occasions, Kushal Tradelink witnessed trading volumes of around 20 lakh share in a day. This probably helped the operators escape the regulatory glare. Often, price rise in stocks where trading volumes are thin attract regulators attention.
“Some brokers convinced their old and loyal client base to invest in the stock for 24% annual return for which they got handsome commission from the operators," said a promoter of large brokerage house.
This arrangement helped many investors make a killing in the stock but BSE’s decision to push the stock to trade-to-trade segment ended the party. When investors buy shares in this segment, they have to take delivery. Also, there are restrictions on daily stack price movements.
These days, investors are racing the exit the stock. On Thursday, Kushal had sellers of 20 lakh shares, while 353 shares were actually traded.
The market capitalisation of Kushal, which stood at Rs 45 crore on August 8, 2013 rose to Rs 7231 crore as on January 24 this year. The stock surge went relatively unnoticed among the wider sections of investors as the company is not tracked by analysts at brokerages.
The company posted consolidated net sales of Rs 1,589 crore in 2015-16 as against Rs 433 crore in 2014-15. In 2013-14, net sales were Rs302.5 crore. Net profit soared 1420% to Rs98.9 crore in 2015-16 compared with Rs6.5 crore the previous year. The sales and profit growth, however, did little to trigger analysts’ curiosity in the company amid chatter that a few Gujarat and Mumbai operators were involved in the stock’s dizzy ascent.
Market watchers said these operators indulged in circular trading to push up the share price.
"The stock was complete Satta," said S P Tulsian, independent equity advisor. "There is nothing financially to justify the rally. Before January 24, there were buyers for several lakhs of shares now selling 100 shares is difficult. This bares it all."
The market is agog with speculation that many high net worth individuals were lured into buying the stock on the promise of 2% monthly interest against assured investment sum in the stock. The only condition was that no shares were to be sold till instructed.
On several occasions, Kushal Tradelink witnessed trading volumes of around 20 lakh share in a day. This probably helped the operators escape the regulatory glare. Often, price rise in stocks where trading volumes are thin attract regulators attention.
“Some brokers convinced their old and loyal client base to invest in the stock for 24% annual return for which they got handsome commission from the operators," said a promoter of large brokerage house.
This arrangement helped many investors make a killing in the stock but BSE’s decision to push the stock to trade-to-trade segment ended the party. When investors buy shares in this segment, they have to take delivery. Also, there are restrictions on daily stack price movements.
These days, investors are racing the exit the stock. On Thursday, Kushal had sellers of 20 lakh shares, while 353 shares were actually traded.
