Naveen Kumar
1 Jul • 2:41 PM · SEBI-Registered Analyst
Does stock fall in these catagories?: P/B Ratio Valuation Post-Correction: The company looks potentially lucrative on a Price-to-Book basis only after a significant market price correction, as the current valuation at ₹30 is considered expensive. Potential Interest Cost Savings: The ₹200 crore raised through the rights issue could be used to retire debt, which might marginally boost net profitability by roughly ₹35 crore annually. Capacity Expansion: The firm is currently operating at maximum utilization and is undergoing a 10% production capacity increase, which provides a long-term though slow growth runway. Key Risks Discussed: Aggressive Promoter Offloading: Promoters currently hold 90% and are using the rights issue to dilute their stake to meet SEBI norms. They are incentivized to keep the stock price hyped until they offload their remaining 12 crore shares. Liquidity & Circuit Risk: The stock is largely "illiquid." Once the hype dies post-rights issue listing July 22nd, the influx of selling from retail participants looking for a "quick profit" will likely trigger back-to-back lower circuits. Valuation Disconnect: Even with future growth, the company’s P/E ratio at current market prices 50x projected earnings is double the sector median, suggesting the stock is fundamentally overvalued. Artificial Volume Hype: The sudden spike in trading volume from 2 lakh to 60 lakh shares just before the rights issue indicates artificial promotion rather than genuine institutional interest.
See More
