Penny stock below Re 1 hits 5% upper circuit as board approves fundraising, preferential share issue

Penny stock Srestha Finvest hit its 5 per cent upper circuit at ₹0.89 on Thursday, October 10 following the company’s announcement of a fundraising initiative through Qualified Institutional Placement (QIP). The company also made other key announcements after its board meeting held on October 9.

Board meet outcome

The Board of Directors of the company convened a meeting on October 9, 2024, from 9:00 P.M. to 10:00 P.M., during which several significant matters were discussed and approved. 

One of the key decisions made was the approval to raise funds by issuing equity shares with a face value of Re.1 each, amounting to a total of ₹100 crore. This fundraising will be conducted through a Qualified Institutional Placement (QIP) in accordance with applicable laws, the company said in a filing. The board noted that this move is subject to necessary approvals, including those from the company’s members and regulatory authorities.

The proceeds from the QIP shall be used for any of the following objectives of the company, i.e. for pre-payment and/or repayment of debts, working capital requirements, general corporate purposes and such other purpose(s) as may be permissible under applicable laws, said the firm.

In addition, the board approved the issuance of up to 93 crore equity shares with a face value of Re.1 each, at an issue price of ₹1.05, which includes a premium of ₹0.05 per share. This preferential allotment of shares is also subject to necessary approvals from members and other regulatory bodies.

Shares totaling 93 crore have been allotted to a diverse group of allottees under the preferential issue. These include Sneha Bhandari, Sunil Bhandari, Financial World India Private Limited, Mayoga Investments Limited, Momento Fabric Fashions Private Limited, Jainex Compuware Manufacturing Private Limited, Kamlesh Vajubhai Nandaniya, Aryadeep Tie-Up Private Limited, Kiwi Delcom Private Limited, Ayodhya Vincom Private Limited, Simplicity Trading, Swastik Trading, Oswal Industries Limited, Alok Kumar, Alok Kumar HUF, Base Engineering LLP, Pratibha Jain, Naina Singh, Rubina Khan, and Mukesh Sharma.

Furthermore, the board also decided to increase the company’s borrowing limit to ₹500 crore. Lastly, the board agreed to convene an Extraordinary General Meeting (EGM) on Friday, November 8, 2024, at 4:00 P.M. at the company's registered office to discuss these matters further and seek member approvals where required.

Other developments

On September 23, 2024, Srestha Finvest reached its record date to determine the eligibility of shareholders for a stock split. Each fully paid-up equity share with a face value of ₹2 was subdivided into two fully paid equity shares with a face value of ₹1 each.

In the fiscal year 2023-2024, the company reported a profit of ₹173.86 lakh, a significant turnaround from the loss of ₹497.41 lakh in 2022-2023. As per RBI regulations, the company transferred ₹37.51 lakh, or 20 per cent of its net profit, to statutory reserves.

Additionally, during 2023-2024, the company issued 25 crore equity shares with a face value of ₹2 each to selected individuals under the Non-Promoter Public Category. This increased the company's paid-up equity share capital to ₹116 crore, which was later split into 58 crore fully paid equity shares with a face value of ₹2 each. The funds raised through the preferential offering were utilised for the company's planned objectives.

Stock Price Trend

The stock has gained over 36 per cent in the last one year and 46 per cent year-to-date. The penny stock has climbed 14 per cent in October so far after two straight months of decline. It was down 19.5 per cent in September and 12 per cent in August. Prior to that, the stock rose for four straight months, up 22 per cent in July, 38 per cent in June, 8 per cent in May and 17.6 per cent in April.

The scrip is currently over 30 per cent away from its 52-week high of ₹1.28, hit in July. Meanwhile, it has surged around 82 per cent from its 52-week low of ₹0.49, recorded in March.