New Delhi, April 22: A look at the B group stocks on the Bombay Stock Exchange reveals that a host of companies, which have been rising steadily over the past three months, are actually loss-making ones with no signs of turnaround. The phenomenal rise of over 100 per cent in such cases is clearly not supported by fundamentals and the rally, therefore, does not seem genuine.The stock price of Mumbai-based LKP Merchant Financing Ltd has risen by an astonishing 500 per cent since January-end when it was quoting at around Rs 2. Today, the scrip is quoting at Rs 16.15 despite a first-half net loss of Rs 56 lakh on an income of Rs 8.46 crore. For the full year ended March 1997, the company had reported a net loss of Rs 5 crore. LKP Merchant's performance has been adversely affected as a result of protracted sluggishness in the financial services sector and a higher burden of interest. In fact, the company has witnessed a downturn in most of its lines of business.
Or take the case of HCL Office Automation. Thescrip, which was languishing at around Rs 5-6 until early January, has suddenly shot up to Rs 20. The over 200 per cent appreciation is not supported by the company's fundamentals. For the full year ended October 1997, the company had a net loss of Rs 14.04 crore on a turnover of Rs 47 crore. The company's low margin business of selling duplicators, copiers and xerox machines manufactured by Toshiba and Duplo certainly does not deserve a relook by marketmen.
Hartron Communications, a joint venture company of Satvir Singh and the Haryana State Electronics Development Corporation, has been in the red since 1995. The company has been affected by less purchases from the Department of Telecommunications. In fact, the company is contemplating leasing out part of their building to generate some income. For the year ended 1996-97, the net loss was around Rs 88.19 lakh on a turnover of Rs 72 lakh. However, this has not deterred punters from pushing up the scrip price from less than Rs 5 to around Rs 14.
BajajPlastics, which manufactures high-density polyethylene woven sacks and laminated fabrics, also reported a first half loss of Rs 5.48 crore while the scrip has zoomed by over 171 per cent. Similarly, the RPG group company RPG Ricoh has appreciated by 109 per cent despite a first half loss of Rs 5 crore. Loss-making hardware manufacturer PCS Industries is another gainer which has seen its scrip zooming to Rs 16 from less than Rs 5 three months ago. The list is long and brokers warn that retail investors would be tempted to enter such low-priced scrips on the rise and find themselves trapped.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
