Padmalaya Telefilms, Yuken India among lesser known stocks soaring on BSE

Mumbai: With the benchmark equity indices hovering around record high levels, many lesser-known stocks have caught up with the rally, and such surge in price is huge, and unexplained in some cases.

A total of 66 companies have seen their stock more than doubling so far this year. Of these, seven companies have seen their stock more than trebling in the same period. The top gainer year to date on the BSE is Hyderabad-based Padmalaya Telefilms Ltd, which has gained a whopping 1042.50% to Rs14.28.

In comparison, BSE’s benchmark equity index Sensex has risen 16.97% year to date, while BSE-mid cap and small cap indices have registered 21.56% and 25.19% gains, respectively, in the same period.

A look at the financials of the company shows it reported a net loss of around Rs1.20 crore in the March quarter, compared with a profit Rs7.40 crore a year ago. An email sent to the company remained unanswered.

Attempts made to call the company were futile. When called on one of the three numbers available on the BSE website, Mint was told the number did not belong to Padmalaya Telefilms. While one of the numbers was answered, and it belonged to Padmalaya, the person on the call could only communicate in local language Telugu.

“In any bull market, investors or traders take extra risk. They tend to give extra weightage to stocks, where liquidity is less,” said Deven Choksey, group managing director at KR Choksey Investment Managers Pvt. Ltd.

“No business can produce a return of 1000% in a period of one or two years. If it does happen, it has to be sustained. In a bull market, story-telling can also start driving certain stocks,” said Choksey. “That is a trap.”

Barring Padmalaya Telefilms, no other stock delivered more than 1000% return.

Also, not all stocks that did well did not have strong fundamentals or reasons to rise. However, it was difficult to justify or quantify the extent of strong gains in some cases.

Shares of Indiabulls Ventures Ltd jumped 662.04% so far in 2017 to Rs156.60. The financial services company saw its profit jump nearly 23 times from a year before to Rs54.06 crore in the March quarter. In the December quarter, however, its profit had more than halved to Rs10.59 crore. Recently, the company’s wholly-owned unit Indiabulls Asset Reconstruction Co. also received a registration nod from the Reserve Bank of India (RBI).

Shares of hydraulics firm Yuken India Ltd jumped 289.50% in the same period to Rs1,640.75. For the quarter ended March, the company reported a profit of Rs2.04 crore, a jump of around 138% from a year ago.

Other companies included Weizmann Forex Ltd, C&C Constructions Ltd, Binny Ltd, which rose 268.23% , 270.07% and 213.07%, respectively, for year to date, to Rs633.35, Rs54.40 and Rs234.80, respectively.

“When the market is bullish, you will always see micro cap and small cap companies delivering exorbitant returns. Some small investors may get lured, and it is difficult to identify what is genuine or what is not,” said Hemang Jani, senior vice-president and head of advisory desk at Sharekhan by BNP Paribas

Jani pointed that turnaround companies can be multi-baggers, but only one in 10 such stories really plays out as per expectations. The risk of investment decisions going wrong is high for small-time investors in such cases, who jump to conclusions on the basis of market chatter.

“Stock picking in this space of course is not an easy task. If one wants to play the small and micro cap stocks, it is better to enter the space through the mutual fund route,” said Jani.

Weizzman Forex, which provides foreign exchange and remittance services, saw its net profit more than double to Rs10.64 crore in the March quarter.

In the case of C&C Constructions, the infrastructure and construction firm reported a profit of Rs. 23.33 crore in the December quarter, compared with a loss of Rs31.64 crore in the same period a year ago.

The stock of C&C Constructions has seen a lot of volatility recently, as it has oscillated between hitting lower and upper circuits over the last few sessions. The stock is currently priced at Rs54.40.

For textiles company Binny, the March quarter earnings were yet to be announced. The company has reported loss in six of seven quarters preceding March. The stock price volatility has been similar to C&C Constructions, with prices hitting lower and upper circuits in the last few sessions.

Emails sent to all the companies mentioned in the story remained unanswered.