Companies in sectors ranging from cement to textiles available for less than the Rs 16-cr IPL bid for the cricketer and there's a related caution for investors looking at these
There are 1,079 companies listed on Asia’s oldest stock exchange which can each be bought entirely for less money than was bid for Yuvraj Singh at the latest Indian Premier League cricket auction.
Delhi Daredevils bid a record Rs 16 crore (Rs 160 million) to get Singh on their side for the tournament. This makes him more valuable than any of these 1,079 companies on the BSE exchange. The companies considered are only those which saw trading activity on Monday. Value is based on total market capitalisation.
These companies are from a number of sectors — infrastructure, finance, pharmaceuticals, chemicals and software technology.
The infrastructure companies include KCL Infra Projects (Rs 13.7 crore), Diamant Infra (Rs 6.69 crore) and Sanmit Infra (Rs 5.17 crore). Finance companies include Visagar Finance (Rs 4.81 crore), Libords Finance (Rs 4.80 crore) and Axon Finance (Rs 4.35 crore).
Pharmaceutical and chemical companies include Sandu Pharma (Rs 13.55 crore), Samrat Pharmachem (Rs 7.94 crore) and Link Pharma Chem (Rs 6.66 crore). Software firms include B2B Software Technologies (Rs 13.35 crore), California Software (Rs 8.47 crore) and ACE Software (Rs 7.48 crore).
There are 51 companies worth less than Rs 1 crore (Rs 10 million) each and 521 worth less than Rs 5 crore (Rs 50 million). And, 849 companies worth less than Rs 10 crore (Rs 100 million).
A P Bakliwal, an investor activist, said these are companies with limited sales but ever-rising share prices. He said such scrips were often operator-driven. Investors who buy into such companies, attracted by the rising price, often find themselves unable to leave once the operators exit.
“Investors should be careful about this. They should look into the fundamentals of a company, as well as the integrity of the management, before making any investment decision,” he said.
He added a lot of these are also sometimes seen as a way for unlisted companies to become listed without incurring the crores in expenditure needed for an initial public offer. For example, cine star Shilpa Shetty and husband Raj Kundra bought into Hindusthan Safety Glass Industries, which had zero sales according to the latest quarterly results available on the BSE. The entity is reportedly to be used as a holding company for their jewellery business.
“Lack of corporate governance and accounting practices which don’t show the true state of affairs are some of the risks involved in investing in such companies,” said S P Tulsian, an independent investment advisor.
P Phani Sekhar, fund manager at Karvy Stock Broking, agreed investors should exercise caution with smaller and unknown companies.
“These are very small companies. To bet on them entails a huge amount of risk. Sometimes, investors go in with the idea that the company has a lot more potential to grow but experience shows 90 per cent of these entities never go to the next level,” he said.
He advised anyone interested to first look into whether a company actually exists on the ground and whether the business is something the investor understands. Only after sufficient due-diligence and understanding of the risk involved should they look at such companies, he said.
Cheaper than Yuvraj but less reliable, too
- Rs 16 crore: 1,079 companies worth less than this amount in the listed space
- Include entities from infrastructure sector; also finance, pharmaceuticals, chemicals
- Rs 1 crore: 51 companies worth less than this amount
- Rs 5 crore: 521 companies worth less than this
- Rs 10 crore: 849 companies worth less than this
- Experts advise extreme caution in dealing with such companies
- Governance issues, dodgy accounting are common
Photograph: Philip Brown/Reuters
