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Stocks trading less than their face value: Risky bets for the investment portfolio

Sameer Bhardwaj     March 6, 2018

Out of 7,659 listed companies, 284 stocks were trading at a discount to their face value on 1 March 2018. Most of such companies are from finance sector (47 companies) followed by textile sector (31 companies) and trading sector (30 companies). Seven companies are mid caps with market cap between Rs 500 crores to Rs 6,200 crores and rest all are small caps with market cap less than Rs 500 crores. Let us look at the top five stocks that are trading below their face value and have delivered highest returns in the last one year. Although, the returns appear attractive in percentage terms, one should be careful while investing in such penny stocks because of the high risk involved. Most of these stocks have reported disappointing numbers in Q3FY18.

Bampsl Securities: The company is engaged in the business of dealing and investing in shares and other securities. It also provides financial services, such as spot financing, short term and long term financial accommodation, and other financial services. On 1 March 2018, the stock was trading at over 81 per cent discount to its face value. In Q3FY18, company's top-line grew by 6.7 per cent. However, due to substantial jump in total expenditure by over 14.5 per cent, its net profit fell by over 12 per cent. The stock delivered 633.6 per cent returns between 1 March 2017 and 1 March 2018. BSE small cap delivered 31.5 per cent returns in the same period.

Lesha Industries: The company is engaged in trading and manufacturing of steel products, and information technology and related services. In the IT space, the company offers solutions for Internet access, web solutions, networking and communication, and data entry operations. On 1 March 2018, the stock was trading at 4 per cent discount to the face value. The company posted net sales of Rs 1.6 crores in Q3FY18. Its net loss widened from Rs 4 lakhs in Q3FY17 to Rs 6 lakhs in Q3FY18. The stock delivered 303 per cent returns in the last one year and outperformed the BSE smallcap index by 9.6 times.

Padmalaya Telefilms:
The company is in the business of film production with a network of film distribution at major centres in India and Film Exhibition network in Andhra Pradesh. The stock was trading at 52 per cent discount to its face value on 1 March 2018. The company reported disappointing numbers for Q3 with its top line falling by over 22 per cent. It failed to generate any net profit in Q3. In the last one year, the stock delivered 242 per cent returns and outperformed the BSE small cap index by over 7.6 times.

Zenith Birla: It is manufacturer and exporter of steel pipes that exports its products to countries like the US, Europe, Middle East, Africa. The current stock price is at 84 per cent discount to its face value. In Q3FY18, the top line grew by 158.3 per cent. It narrowed its net loss to Rs -1.76 crores in Q3FY18 compared to net loss of Rs -8.48 crores in Q3FY17. The stock delivered 151 per cent returns in the last one year and outperformed BSE Smallcap index by 4.8 times.

Alka Securities: It is a financial services company that offers corporate advisory and capital syndication services. It operates in the wholesale debt market primarily in government securities. On 1 March 2018, the stock price was at 52 per cent discount to its face value. In Q3, the company made a meagre profit of Rs 3 lakhs. In the last one year, the stock delivered 140 per cent returns and outperformed BSE Small Cap Index by over 4.4 times.

 


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