GMM Pfaudler shares locked in 10% lower circuit for second day in a row

Shares of GMM Pfaudler were locked in a 10 percent lower circuit for the second session in a row on BSE on September 23.

In the previous trading session, the stock hit 10 percent lower circuit of Rs 4,717 while today, it hit the lower circuit of Rs 4,245.30 in intraday trade on BSE.

The stock has been on a losing streak since September 16 and if it closes in the red today, it will be its sixth consecutive session of losses.

Shares of the company have been witnessing selling as the promoters of the company have offered to sell shares at a significant discount.

The company's promoters said they would sell nearly 26 lakh shares worth Rs 1,433 crore at a 33 percent discount (Rs 3,500) to Monday's market price of Rs 5,241.10 on BSE.

The promoters Pfaudler Inc. and Urmi Patel are selling 25.71 lakh shares or 17.59 percent of the total equity with an option to additionally sell 15.21 lakh shares that represent 10.41 percent of the total issued and paid-up equity share capital of the company, GMM Pfaudler said in a release.

The allocation shall be at or above the Floor Price on a price priority basis a multiple clearing price basis.

In a BSE filing on September 22, the company said it intended to exercise the oversubscription option to the extent of 4,28,571 (approximately 2.93 percent) equity shares of the company in addition to the base sale shares of 25,71,429 (approximately 17.59 percent) equity shares.

The final sale shares will be 30,00,000, constituting approximately 20.52 percent of the paid-up equity share capital of the company.

Mazhar Mohammad, Chief Strategist – Technical Research and Trading Advisory, Chartviewindia.in said that the stock may not hold strong support around Rs 4,000.

"If we go purely by technical charts then this counter has undergone a multi-week consolidation around Rs 3,950 before unleashing a sporadic upswing from the lows of Rs 4,000 to Rs 6,900 levels in just two weeks," Mohammad pointed out.

"In normal conditions, the chances of this level holding up will be much higher. However, considering the fact that this company has fixed OFS price at Rs 3,500, the strong support around Rs 4,000 may not hold," he added.

The analyst underscored that the next support on charts, below Rs 3,950, is placed around Rs 3,450 levels. Therefore, on bigger correction, it could become a buy around Rs 3,500 levels by default.

"Considering the strong interest and long term uptrend of this counter initial target in the zone of Rs 4,800 -Rs 5,200 can be expected over a period of time assuming it will bottom out around Rs 3,500 levels. If some are already holding then they should exit at the earliest opportunity," Mohammad said.