👉Everyone wants to know what led the fall in stock ?
👉In 2014 stock was Quoting at Rs. 38 and in span of 4 years Stock has touched high of 600 in Jan 2018. Giving almost Multibagger Returns Of 1600% in just 4 Years.
👉In last two decades there were many stocks like PC jewellers which Rose & was traders Favourite & was in lime light But stocks suddenly lost almost all gains.
👉From the Era on 2004 To 2015 there were many PC like RNRL(Reliance Natural Resources Ltd), HDIL, Parshavnath Developers, GMR Infra,Lanco Infra, Rcom , Aban Offshore.
👉Once these stocks were traders hot favoutite. These stocks use to give wild swings.As almost all of them were in Future & Option, it’s rise or fall is not capped to 20%. Means stock can rise or fall 20,30,50,60% same day.
👉Those who are in Markets from 2004 might remember well. I am in Markets from 2003. Aban use to trade at 7500, Parshavnath Developers use to trade at 500, GMR Infra use to trade at 800+, RNRL rose from Rs. 10 to 300+ in some 3 years. But over a period of time slowly and gradually all stocks lost almost 90% To 99% Of it’s value from all time high.
👉The point here is how to Identify such Stock & Predict that there can be huge fall going forward like PC jewellers as it has corrected almost 85% from its high of 600 in Jan 2018 to lows of 95 on 3rd May 2018.
➡️Stocks becomes Volatile & As it’s in Future &Option ,so it gives wild swings of 30%,40%,50% also and Than recovers also only to fall Futher.
Last month PC Jewellers also have such wild swing from 400 it went down to intraday lows of 207 & corrected & recovered almost Flat to Positive.
✳️ Few points How to Identify such stocks?
➡️ Stock stays in Controversial .
PC Jewellers is in Controversial from last many months with Vakrangee.
➡️Management comes ahead for clarification.
PC Jewellers management also came for clarification.
➡️Generally before a big fall stocks might have just hit Multi year high few months ago.
PC Jewellers hits Multi year high of 600 just in Jan 2018 & than Controversial started & fall came.
➡️Rebound is very Sharp after the Fall.
👉 Stock would rebound Sharply after the Big fall.
👉Just make a case study all things also had happened with above stocks like RNRL, GMR Infra, Aban , Parshavnath etc
What happened they recovered & than again starting going down & Destroying Huge Wealth for investors.
👉They never got Higher Valuation.
👉we want investors to identify such stocks and stay away & protect there capital.
1)Company has some involvement with Vakrangee
2)It could turn out to be another Gitanjali Gems or Nirav Modi or Mehul Choksi type scam.
3)CBI arrested Promoters of Company later clarified.
4)Connection with Gitanjali Gems
5)Promoter Selling their Stake
6)Promoter would Flew from country
7)Debt on books
1) Vakranjee had stake in PC Jwellers , that doesn’t mean it has any wrong connections for which company has already clarified.
2)If it had to be a Gitanjali or Nirav Modi like scam some Bank would come out saying that PC Jwellers has taken Loan illegally.
3)Management comming on leading business channel and clarified that there has been no arrest by CBI.
4)If connection with Gitanjali Gems , it would have came out earlier.
5)Recently company has done off market transaction by gifting 2% Stake
6)Promoters are in country
7) Debt on books Is Rs 661 Cr For DAY 2017 & company paid Interest of Rs 275 Cr.( This Is Alarming)
A million Dollar Question
According to Balance sheet companies total debt is Secured debt, then why would any secured Lender charge hefty Interest ?? Which is more then 20%.
The Miss Match:
Comparing 2016 vs 2017
Debt has been Reduced from Rs.940 Crs to Rs.661 crs
Interest has increased from Rs.214.95 Crs to Rs.278 Crs
Even Quarterly Numbers has High Interest.
Cash & Bank Balance has Increased from Rs.336 Crs to Rs.1191 Crs
Assets increased from 3266 Crs to 4043 Crs
Now the Question is How could A company with 855 Crs EBITA decrease it’s Debt significantly with no significant decrease in INTEREST & Increase it’s Reserves , Cash , also Increase it’s Inventory & Assets.
Company has only shown to have increased its Liabilities .
However Given the Size of Operations Debt on its balance sheet is Small comparing case of Gitanjali Gems it ran into Rs.8000 Crs.
👉To arrest Stock price fall Company has announced buy back which has to be approved by board on 25 th May 2018.
These could trigger Confidence In investors.
Be Cautious .Be Alert.
Warren Buffet Rightly said
“Risk Comes from Not knowing what you are doing”
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👉Disclaimer – All Views expresses are personal & for Study purpose only. Consult your Financial advisor before investing. This is not Buy/Sell or Hold Recommendation. It’s case study basedonpastexperience.