— Albert Einstein, German Physicist
NEW DELHI: Absurdity is more common in the financial markets than you think. Or how would you explain a 1,209 per cent surge in just over two months in a stock that belongs to a company, which has not earned a single penny for nine quarters, has been through the insolvency process and is just relisted for trading?
, a Hyderabad-based agri-biotech company, were relisted on May 20, 2021 on the bourses at Rs 1.40 per share. They had surged to Rs 18.33 as of Friday. Such has been the demand for the stock that in the last 51 sessions that it traded, it has hit the upper circuit limit every day!
What is interesting is that it is majority owned by retail investors. Close to 20,000 shareholders own 93.92 per cent stake in the Rs 189 crore company. Such ownership of retail investors could be due to the finalisation insolvency proceedings.
However, even before relisting, when the promoters were reclassified, retail and HNIs held 61 per cent in the company, which was earning zilch and incurring repeated losses.
Before being relisted, the stock last traded on February 1, 2021 at Rs 0.36 per share, data available with BSE shows. In the last couple of years, the company has gone through the insolvency process.
The company has also changed its name multiple times. It was first registered with the Registrar of Companies (RoC) as Garden Cements Private Limited, which was later changed to Proseed India. The company’s website also mentions another former name for the firm: Green Fire Agri Commodities.
Now, it has changed the name to Equippp Social Impact Technologies, as per a company filing on June 24. Though BSE and NSE are yet to update it on their platforms. The company website is also not updated to incorporate the new name.
So, has something fundamentally changed with relisting? At first glance, nothing. The company has a history of not performing at all, financially speaking. In the last nine quarters, it has generated zero revenue. The company showed Rs 12.94 crore in net profits for March quarter, 2021, though it was hard to ascertain how the company arrived at the number when there was no revenue.
Even before that, revenue stood at a few lakhs per quarter and losses were rampant. No wonder, it could not pay its creditors which included Corporation Bank, Barret Commodity Traders (which filed insolvency plea against the company) and the Income Tax Department.
But the company now has a new promoter, Equivas Capital, which acquired the business through IBC. As for the stock, the float is definitely low, after the share capital was reduced by 95 per cent. Moreover, the new owners were allotted 10 crore preferential shares in July.
The company’s filings with RoC and BSE show with the change in name, its business will also change. It now plans “to carry on with the business of software design, development, customisation, implementation maintenance, testing and benchmarking, designing, developing and dealing in computer software and solutions.”
The company could not be contacted to seek clarity on these issues.
Analysts refrain from talking about such stocks, which they believe run up just because there are fly-by-night operators in the market, taking advantage of retail interest in share markets.
A few other stocks have had similar stories playing out over the past two years. Two famous examples are Alok Industries and Ruchi Soya, which delivered thousands of per cent of eye-popping returns before crashing like ninepins.
What is different between those cases and that of Proseed India is that Alok and Ruchi Soya were acquired by stable hands – Reliance Industries and Patanjali – on which the Street could trust to revive their operations. Besides, both had very low float. But in the case of Proseed India, the acquirer
— Equivas Capital
— is little known.
Even the story of zero revenue and surging stock price, which defies all logic, is not the first instance. Before this, Golkonda Aluminium, which has no employee on its rolls or any operational business, surged manifold during a rally in metal stocks earlier in the year.
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