Down to a few paise: Debt-ridden firms’ share prices crash as liquidation looms

Source:- thehindubusinessline.com

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In what could be termed a complete erosion of investor faith, shares of a number of debt-ridden companies are trading at dismal levels, some as low as 19 paise. Now stressed, and some under bankruptcy proceedings, many of these companies’ shares were trading as high as ₹900 during their peak.

For instance, the share price of Uttam Value Steels closed at 19 paise, Sterling Biotech at 77 paise and Castex Technologies at 82 paise on Tuesday, while Punj Lloyd fared slightly better at ₹1.69. RCom was at ₹1.97 and Videocon Industries at ₹2, while Bafna Pharmaceuticals closed at ₹9.01, Monnet Ispat and Energy at ₹21.30 and Usha Martin at ₹30.95.

Little hope

“There is a fear that most of these companies might be heading for liquidation, and they (investors) don’t see any hope in these firms. Since there are other options, many investors would be utilising them, while some of them have stayed invested hoping there will be a revival in the fortunes of these firms,” Daizy Chawla, Senior Partner, Singh & Associates, told BusinessLine.

“The share prices of some of the big firms, such as Bhushan Steel (now renamed Tata Steel BSL), which have strong resolution plans in place, are expected to bounce back, but this will take some time. These are companies with good assets and now operating as going concerns,” she added.

Several of the companies — such as Jaypee Infratech (historical high of ₹920.7 in 2010), RCom (₹889.65 in 2005) and Monnet Ispat (₹635.85 in 2008) — were among the most-sought after on the bourses at some point in time.

“The dismal performance of the companies on the bourses has nothing to do with the ongoing political and socio-economic issues, but reflect the managements’ doings and companies’ performance. A firm is referred to the NCLT (only) when its debts have mounted to levels where it is unable to service neither the principle nor the interest,” said Pradeep Agarwal, CEO at financial advisory Meri Punji IMF.

“Investors believe that due to poor governance and high debt, the road to recovery of these companies would be arduously long and difficult and this has resulted in the erosion of their share price,” he added.