If you had invested Rs 25,000 in the shares of The Yamuna Syndicate (TYS), you could have earned over Rs 1 lakh in 30 days, as the share price of the company has moved up to Rs 11,641 per share from Rs 2,864 per share in just one month.
But is the stock rally really backed by the fundamentals? Let's take a look.
TYS reported a total income of only Rs 67 crore and posted a net profit of Rs 10.9 crore during 2017-18.
Though TYS is a small-cap company, it has a substantial holding in another BSE-listed company, far bigger than its size.
TYS holds 44.83 percent in ISGEC Heavy Engineering, an associate company of TYS. ISGEC has reported a total income of Rs. 3,883 crore during 2017-18 and posted net profit worth Rs. 168 crores.
The surge in the share price of TYS is also not matching with the share price movement in its associate company - ISGEC. During the same period, the share price of ISGEC’s increased by only 3 percent.
The Bombay stock exchange sought clarification from the company on August 14 with reference to its sudden spike in share price.
Responding to the exchange, the company said that there was no information, event or disclosure which is pending from the company to furnish to the stock exchange which could have impacted the stock price of the company. So, there is no trigger for such an increase in share price.
BSE has, for now, put the company on the ASM (additional surveillance measures) list to keep a check on the stock. ASM is a new category formulated by SEBI to check market manipulation. High-risk stocks are placed under this list where the stock price is not justifying fundamentals of the company.
What does ‘The Yamuna Syndicate’ do?
Founded in 1955, The Yamunanagar, Haryana-based company trades in a variety of products through various dealerships, according to the company website.
The company has a dealership of New Holland Fiat tractors, distributorship of Amaron batteries, and dealership for electrical home appliances of Crompton and also a petrol pump in Yamunanagar, among other dealerships.
Listing on BSE
The company didn’t get listed on the Bombay Stock Exchange (BSE) through the direct route. It was earlier listed on Delhi Stock Exchange (DSE) but after de-recognition of DSE by the SEBI, trading in all the companies that were listed on DSE got suspended.
All the DSE-listed companies had two options: either to get listed on a nationwide exchange or give exit to the existing shareholders through a buy-back.
Listing on a bigger stock exchange results in additional costs and compliance pressure on the companies and hence TYS also chose to give an exit-offer to its public shareholders, instead of getting listed on the main bourse.
The company gave first exit offer of Rs 1,600.25 in 2015 which didn't get much response. Then again in 2016, the company made a fresh offer of Rs 1,845.26 but failed to buy-back all the public shareholding.
After two unsuccessful attempts to buy-back shares from the retail shareholders, TYS got listed on the BSE with effect from March 1, 2018.
“The exit offer price given to the shareholders was nowhere near its fair value, considering it has more than 40 percent of stake in ISGEC, which has a market cap of more than Rs.4,000 crore," said a Delhi-based broker who also trades in unquoted shares.
"We were expecting a higher exit value and we did expect that the share price of TYS to go up post-listing. However, the way share price of TYS has moved in the last few months is very suspicious,” he added.