Please remember, these are not recommendations/ suggestions to buy or sell. Strictly for educational purpose the Indian Economy & Market Research Team has collected these details from the public domain for our subscribers as these couldn’t be a part of our regular monthly magazine.
The Ice on the Cake
Around four weeks back we discussed here some of the new entrants in the markets and their respective performances like Policy Bazaar, Paytm, CarTrade Tech, Happiest Minds Technologies, IndiaMART and some others. Logically slicing each one of them we wrote in detail why those stocks were overvalued. Now as the market is slipping still all those counters are slipping with far more speed. Take Nykaa: IPO priced at Rs 1125, listed at Rs 2018 and made a high of Rs 2574; on 22 February traded at Rs 1219 and now available at Rs 1500 and after rebalancing on marketcap basis now it has been put in the list of Nifty Next 50 list. In Q3 its sales was up from Rs 808 crore to Rs 1098 crore, however operating profit was down from Rs 107 crore to Rs 69 crore and net profit from Rs 69 crore to Rs 28 crore. On 9 months basis profit is Rs 32 crore. Calculating these figures the EPS for 9 months comes to Rs 0.70 paisa and 1200PE. So sales are increasing aggressively but OPM is between 3-6 per cent although it is lone Unicorn listed in last few months which is at least making some profit. Compare its marketcap of Rs 71,000 crore with Cipla’s, BPCL, IndusInd Bank, and Brittania which are almost in the same range but clocking profit above Rs 2500 cr, Rs 18000 cr, and Rs 4000 cr respectively. Certainly these companies calculatedly entered in the market when it was the best of times, but if you see the stocks on any valuation parameters do you think they deserve to be in your portfolio?
SEL Manufacturing Company is another stock that needs your attention. Its IPO, priced at Rs 90, came in July 2007, was listed in August 2007 and after listing within a year in August 2008 it was trading at Rs 735. Everything suddenly changed when stock market crashed in October 2008 as a result of defaults on consolidated mortgage-backed securities in USA. That time its equity was around Rs 25-30 crore which came to be a whooping Rs 331 crore in March 2013 but the company is registering losses since 2014. The company went under the spanner of NCLT only to get a new owner last year. After resolution process at around Rs 33 crore equity it was re-listed at Rs 4.95 on October 28, 2021. Right from that day till the last Friday on March 5, 2022 when it closed at Rs 341.50, the counter has been in a non-stop upper freeze. This textile company still is posting continuous losses – June quarter it was Rs 42 crore, September quarter Rs 37 crore and December quarter Rs 28 crore loss, when all the textile companies had been making huge profits during last 7-8 quarters. The counter gets a volume of hardly 25 shares a day; last full week altogether only 111 shares were traded in total yet gave a return of 22 per cent in the week. It is just a gentle reminder to all those who are swayed by price movement. Don’t burn your fingers as such stocks never enters in the arena of multibagger club.