908 stocks on BSE trade below their face value

Good bargains still exist but need homework on basics

Of 3,167 actively traded stocks on the BSE exchange, 908 were quoting below their face value as on Monday.

These 908 companies have seen an average value erosion of 55 per cent in their market values. Their combined market capitalisation slipped to Rs 16,508 crore from Rs 36,350 crore at the beginning of the current calendar year.

Of these 908 stocks, 607 belong to the BSE’s B-Group; the other 301 are T-Group counters.

Explains G Chokkalingam, executive director and chief investment officer, Centrum Wealth Management: “The market has been largely driven by foreign institutional investors  over the past year, which mostly focus on large-cap stocks, besides select mid-caps. Due to lack of appetite for most of the stocks, coupled with industry slowdown, the mid-cap stocks especially have taken a huge beating whenever there are adverse news flows.”

Value erosion
Bartronics India, Sudar Industries, Royal India, Jindal Cotex, Amar Remedies, A2Z Maintenance Engineering Services and Kiri Industries are among those trading below their face value.

Jai Prakash Power Ventures, PTC India Financial Services, Madras Fertilisers, Jindal Capital and Future Ventures are among 50 other companies currently trading near to their paid-up values.

“Stocks like A2Z Maintenance are an example of the undoing of one big bull. Kiri Industries was a bad decision against the shareholders, which seems to have been done for the interest of the promoters. Some of the stocks could be operator driven, with a dubious background,” says Arun Kejriwal, founder, Kejriwal Research and Investment Services. “There could also be a syndicated approach to price rigging in some counters and the stock could tank heavily in case there is negative news. Unfortunately, investors cannot separate wheat from the chaff while investing.”

Lack of investor interest and poor fundamentals have also led to a fall in the market price of these companies. Most of these are quoting below par and have a gloomy outlook on performance, with bad financials.

Of these companies, about 360 have so far announced their June quarter earnings and reported a combined net loss of Rs 471 crore against Rs 454 crore in the same quarter of the previous year.

Outlook
So, what should you do with these counters? Is it better to book losses at the current levels?

“I don’t foresee any major improvement in the economy and, in turn, the markets till the general elections are over. The carnage in these spaces has been bad and investors are scared out of their wits to invest, as things stand. However, having said that, there are a few good opportunities which I like, such as Astral Poly Technik, Kaveri Seed and Ruchira Paper," says Kejriwal.

Also saying: “Stocks like Bartronics India, Sudar Industries, Royal India and GTL Infra suffer from a combination of factors like high leveraging, very high pledging, huge stress on the balance sheet, etc. Most of them have a bleak future. We remain positive on Future Venture, as it has over 25 brands and many of these in the fast-moving consumer goods space. Hence, it has potential to monetise some of these brands and make a significant turnaround.”