Mumbai: Sylph Technologies Ltd, a little-known Indore-based company, saw its stock price soar some 99,900% from previous price of 80 paise to a high of Rs800 a share on Thursday when it relisted on the Bombay Stock Exchange (BSE). It eventually closed at Rs195 a share, for a 24,900% gain.
Sylph’s stratospheric rise comes a day after the abnormal price movement of another penny stock belonging to the Z category, KGN Industries Ltd, which zoomed 76,000%, resulted in the BSE’s surveillance department suspending the stock by 12.20pm Wednesday, when its price was around Rs15,000 a share.
KGN’s shares had risen to Rs55,000 from an intra-day low of Rs72 a share even though just 827 shares had actually changed hands. At that high, KGN, which reported Rs1.51 crore net profits for the year ending March, was briefly India’s eighth largest publicly traded company by market capitalization, just behind mobile phone giant Reliance Communications Ltd.
KGN and now Sylph have made a mockery of BSE’s so-called price discovery mechanism for stocks on the day of relisting, which was designed to leave the circuit filter open “in order to enable the members to deal in the scrip at a realistic price level”.
Analysts and brokers said this loophole of open circuit filter on price movements for a certain stock category, on the day of relisting, is being manipulated by a set of traders.
“This is a wake-up call,” said Anil Advani, head of equity research at SBI Capital Markets Ltd, the brokerage subsidiary of State Bank of India.
Majjarrrsha Housing Finance Ltd, a small lender, was rechristened Sylph around November 2007. While the company is categorized as a finance company in some equity research databases, it falls under software category dealing in data processing and website maintenance in some other.
It reported a net loss of Rs0.8 crore for the quarter ended March.
A BSE spokesperson refused to comment on both stocks but added that the exchange would investigate and submit a report to Sebi, India’s capital markets regulator.
Earlier Thursday, BSE had let KGN resume trading, at an adjusted price of Rs5,216.30 a share.
Despite the huge first day gains, KGN shares rose 4.9% to Rs5,477 a share before closing at Rs5119.23, while the Bombay Stock Exchange’s benchmark Sensex index fell 1.63%.
Rajesh Jain, a director of Sylph Technologies, said in an interview on CNBC TV18, that on the net worth basis, he believed the company’s fair value would be Rs8-9 a share and, based on earnings per share, it could be around Rs3 a share.
Unlike KGN, which floated just 1.43% of its equity, Sylph had listed some 75% of its shares.
According to the Bombay Stock Exchange’s website, the so-called Z category of shares represents companies that have not complied with various provisions of listing agreement, typically meaning investors should be more careful in buying or selling such stocks.