Penny FMCG stock Sarveshwar Foods has posted multibagger returns in the last 4 years, rising from ₹0.34 to around ₹8.5 currently. This implies a return of 2400 percent for its investors in this period. An investment of ₹10,000 in this stock in March 2022 would have turned into ₹2.5 lakh now.
Sarveshwar Foods Limited manufactures and sells basmati and non-basmati rice in India. It provides basmati brown rice, raw rice, steamed rice, silky raw rice, white parboiled rice, and golden parboiled rice; and non-basmati rice, including Indian long/medium/short grain white raw rice, white parboiled rice, grain golden parboiled rice, and grain brown rice.
The company also offers organic foods under the brand name of Nimbark. The company was formerly known as Sarveshwar Organic Foods Limited and changed its name to Sarveshwar Foods Limited in June 2015. Sarveshwar Foods Limited was founded in 1890 and is based in Jammu, India.
The stock has surged over 253 percent in the last 1 year and 55 percent in 2024 YTD, giving positive returns in all 2 of the 3 months this year so far.
It has shed 37 percent in March so far, snapping after 3 straight months of gains since December 2023. Between December and February, the stock rallied 191 percent. It rallied 85 percent in February and 33 percent in January this year.
Currently trading at ₹8.5, the stock is 46 percent away from its record high of ₹15.73, hit earlier last month on February 28, 2024. Meanwhile, it has soared over 310 percent from its 52-week low of ₹2.07, hit on March 28, 2023.
The impressive surge in value highlights the strong market optimism and favorable sentiment surrounding the stock, representing a significant milestone for the company amidst the current market climate.
In the December quarter (Q3FY24), the company posted a massive 118 percent jump in its net profit at ₹1.92 crore as against a profit of ₹0.88 crore in the same quarter last year. Meanwhile, its revenue in the quarter under review rose over 17 percent to ₹98.93 crore in the quarter under review from ₹84.17 crore in the same quarter last year.
According to ICICI Direct, the company has been effectively using its capital to generate profit with its RoCE improving in the last 2 years. Moreover, the firm has also witnessed a growth in its quarterly net profit with increasing Profit Margin (YoY) and its profits have risen every quarter for the past 4 quarters, noted the brokerage.
However, the stock has lost over 20 percent in March so far, which is a negative, cautioned the brokerage.
Penny stocks, commonly valued below ₹10 in India, stand out for their affordability and speculative allure, often representing shares of nascent or struggling companies traded at limited volumes. While their low price may attract investors seeking potential high returns, it's paramount to grasp the inherent risks.
These stocks are notorious for their extreme volatility, prone to sharp fluctuations driven by market sentiment rather than fundamental value. Such volatility exposes investors to various risks, including the possibility of falling victim to pump-and-dump schemes orchestrated by manipulative actors looking to artificially inflate stock prices before swiftly selling off their shares, leaving other investors with substantial losses.
Moreover, penny stocks often face liquidity challenges, meaning that buying or selling large quantities of shares may significantly impact their prices. This illiquidity exacerbates the risk for investors, particularly during times of market stress when exits may be challenging.
Furthermore, the opaque nature of penny stock companies can make them susceptible to manipulation. With limited regulatory oversight and reporting requirements compared to larger, more established companies, there's a heightened risk of fraudulent activities such as insider trading or falsified financial information.
Despite these risks, some investors are attracted to penny stocks for their perceived potential to uncover hidden gems and capitalize on the growth prospects of small companies. However, it's crucial for investors to exercise caution and conduct thorough due diligence before venturing into this volatile market segment.
Disclaimer: This story is for educational purposes only. Please speak to an investment advisor before making any investment decisions.
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