Sensex
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From: The Sharekhan Research Team [mailto:marketwatch
Sent: 22 May 2008 17:01
To: The Sharekhan Research Team
Subject: Sharekhan Post-Market Report dated May 22, 2008
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All in a day: KGN scrip moves from Rs 100 to Rs 55,000
AHMEDABAD: An Ahmedabad-based company had an unbelievable run on the Bombay Stock Exchange upon re-listing on Wednesday, shooting from Rs 100 to Rs 55,000 during early trade, breaking the record of MMTC which is the most expensive scrip on the bourses at Rs 27,050.
The stock of KGN Industries, which is headquartered off C G Road, closed at Rs 15,001 on rather thin volumes of 827 shares, but not before creating history of sorts and also trading being suspended on the bourse after nearly two-and-half hours of trading.
Since it was the day of re-listing, as per current rules no circuit-breakers were in place, allowing the stock a free run to find its level on the day of its re-admission for trading. However, since the bourse officials found that orders were being placed at unrealistic prices, the trading in the scrip was suspended at 12.20 pm, as a proactive surveillance measure, BSE said in a release. KGN Industries used to be known as Royal Finance till it was de-listed in February 2001 when the last traded price was just Rs 11.
In the release, BSE, acknowledging the unusual trading in the KGN stock, said it had already started an investigation to examine the orders which were placed at unrealistic prices and added that "appropriate action, if any, will be initiated against the concerned entities."
KGN Inds scrip is under the trade to trade category of BSE. This means every trade, buying and seeling, has to result into payment of cash (for buying) and delivery of shares (for selling). No netting of trades is permitted for stocks in the trade to trade category.
The closing price of Rs 5,216.30 has been arrived as per the existing methodology but taking into consideration the entire trading duration, the BSE release said. A few years ago, the company surrendered its licence as a non-banking finance company (NBFC) to the Reserve Bank of India and the promoter, Aris Menon, got into castor-oil trading business.
The company's name was changed to KGN Industries in 2007 and it did a rather fiery relisting on Wednesday which analysts found completely baffling. "We will advise investors to stay away till the fundamentals of the company are properly scrutinised," said an analyst. While his staff said that Menon, the company's managing director, was travelling abroad, one company official said KGN Industries had only about 15 employees and a net profit of Rs 1.25 crore from a turnover of Rs 250 crore.
A unique opportunity is just a few days ahead but to grab it we have
to apply our sense. As per our past experience in stock market, we had
been seeing that if bonus is 1:1 than price is reduced to 50%, if
bonus is 1:2 than price is reduced to 33%. So on the same pattern, in
rel power 3:5 bonus, price should be reduced to 5/8x100=62.5%
is not so in case of Rel Power. Dear all in all historical bonus
except in Rel power, this bonus ratio is applied to Total Shares of
company Including Promoter. Anyone can check in bonus history that if
bonus is 1:1, than on ex date total shares of company become double so
price adjusted to 50%.
Take a example that if a company have 100 crore share, price of each
is 1000, so total market capital of company is 100x1000=1,00,
lack ) crore. Suppose bonus is issued 1:1 ratio than on ex date in the
market total shares are 200 crore, if we apply our sense than it is
definitely not possible that with same price 200x1000= 2,00,000 (2
lack crore) just over one night, So on ex date price will be 500 and
market capital is same 200x500=1,00,
difference is that before bonus company has liability of 100 crore
share of face value 10 each, so total face value(called as Paid up
capital) is 100x10=1000 crore. If company announce bonus of 1:1, than
face value (paid up capital) 200x10=2000 crore. Dividend is given on
face value, if company announce dividend of 20% before bonus, than
company liability is 1000x20/100=
announce same dividens after bonus company has liability of
2000x20/100=
So practically after bonus total market capital of company remain same
but total face value is increased proportionally and we get more
dividend if announced after bonus.
Now come to Rel power. Here total share are 226 crore before bonus(any
one can check at NSE site). So paid up capital is 226x10(face
value)=2260 crore . Bonus is 3:5 for non-promoter only(which are
having only 22.8 crore share out of 226 crore), so after bonus total
share are not 226x8/5=361.
promoter) + 22.8x3/5(=13.
through 25.02.08 Rel Power NSE announcement on second page 17th line,
that paid up equity shares are increase to 239.7 crore.
So, before bonus and after bonus company capital should be same(if no
big fall in market on ex date). Currently Rel power is quoting around
400, so total market capital is 226 crore x 400=90,400 crore. After
bonus total share are 239.7 crore, so keeping the same market capital
reduced price is 90,400/239.7=
. Here scene is that Only 10% non promoter are given bonus and out of
10% non promoter, if we leave FII, DII etc general public( retail
investor, HNI )are 4.28%. And this 4.28% common public is unable to
digest this opportunity that how 400x5=2000 can be 377x8=3016 just in
few days. Did anyone see that FII, DII(MF) are crying on this issue,
they are waiting for the opportunity when this common public will
release their bonus share (which they are unable to digest) on ex date
at lower price and they will grab it. Dear investor compare the price
on the basis of total market capital before and after bonus. Some big
fish will try to low the price on and after ex date to compel small
investor to release their stake. Many are creating panic in market
that ex bonus price will be around 300 or even less Than think in way
that 239.7 crore x 300=71,910 crore market capital. Did Anil announce
bonus that company which was of 90,000 crore would become of 70,000
crore. Believe on him he will take care for that but u all have to
keep patience for some time. Controlling price is also in public hand,
if we all don't sell on ex date how price will come down, than only
FII and DII will left and they are enough sensing the situation.
If u all can wait for three-six month than price will come around 500
as project progress happen than imagine 400x5=2000 will be 500x8=4000,
100% return in around 4 month. So don't think of selling but digest
the opportunity with sense(total market capital of company before and
after bonus). Best of luck.
From: The Sharekhan Research Team [mailto:marketwatch
Sent: 21 May 2008 16:50
To: The Sharekhan Research Team
Subject: Sharekhan Post-Market Report dated May 21, 2008
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