This Wednesday, another Rs 10 paid-up scrip has registered a fluctuation of Rs 600 within a day. Though unjustified, the fluctuation of Rs 680.40 to Rs 1,900 on its muhurat day in the second week of November witnessed by Hughes Software was quite understandable, considering the euphoria created around its public issue.

But, the latter one, from Rs 500 to Rs 1,100 on its first day achieved by a little known pharma company, Strides Arcolab Ltd (coded as STAR by the NSE) is indeed quite intriguing. Since STAR never made any public issue, not many investors would know about the company. STAR is an amalgamation of the Bangalore-based closely held Strides Pharmaceuticals Ltd and Remed Labora tories (I) Ltd along with the Mangalore-based 1995-public issue vintage, Plama Laboratories Ltd, which never got off under the previous management.

Since it was a `reverse merger' of the loss-making Plama taking over the profit making Strides, the amalgamated entity was automatically entitled for listing.

As a prelude to the merger, Plama, after languishing for more than three years way below par, started looking up since the beginning of 1999. From a low of Rs 3.50 in January, this scrip hit its historical peak of Rs 66.65 on 14 October 1999. On the `record date' of October 15, it closed at 52.35.

Since every 8 shares of Plama were exchanged for 1 share of STAR in November, the last price of Plama translated into Rs 418 for a STAR scrip.

Meanwhile, in the third quarter of 1999, STAR placed with Morgan Stanley 8.5 lakh shares at a price of Rs 300 apiece. Considering these, STAR's opening quote of Rs 500 on the NSE looked reasonable. But, the flare-up on the same day from Rs 500 to Rs 1100 raises doubts about the genuineness of the price.

It is worth noting that though STAR's post-merger equity stands at Rs 13.6 crore (136 lakh shares), the net holding of the public (mainly the public shareholders of Plama) works out to less than 5 lakh shares (based on the exchange ratio of 1:8).

In other words, more than 96 per cent of the company's equity is said to have been under the category of `promoters, associates, collaborators, venture capitalists and private placements'. Among the large stake holders, the professional promoters and collaborators (Arcolab of Switzerland) reportedly hold 30 per cent and 6.4 per cent respectively. In fact, the venture capitalists -- Schroeder group of UK held the largest chunk of around 32% which was acquired at just Rs 55 apiece during fiscal 1999.

Morgan Stanley, with over 8 lakh shares, was also a large shareholder in the company. Another noteworthy aspect is, most of the 7,000-odd public shareholders of Plama ended up in odd lots, that is, less than 100 shares per head, because of the odd exchange ratio. Against this, on the first day of trading, STAR recorded an average volume per trade of more than 3200 shares! Interestingly, the first day's volume of 7.72 lakh shares far exceeded the original public float! Given the small public holding, without the participation of any of the large shareholders, STAR couldn't have had the kind of volume that it recorded on the first day.

The volume has now receded to below 10,000 shares. But the price is still steady at above Rs 900. Can it sustain for long? No doubt, STAR should achieve a significant growth in the coming years as its Rs 62 crore "world class" soft gelatin capsule project has become operational since July 1998. For fiscal 1999, STAR posted a consolidated net profit of Rs 9.13 crore against the consolidated equity capital of Rs 8.36 crore.

This gives an EPS of around Rs 11, which is discounted by the current market price of Rs 960 over 87 times! Currently, even the multinationals which have a better track record than STAR do not command such P/E ratio. At the current industry average of 52 times, STAR's price can't be more than Rs 570.At the end of current fiscal, STAR's equity would be more than Rs 13 crore.

If the present industry discounting is anything to go by, to justify a market price of over Rs 960, STAR should have a historical EPS of at least Rs 18.50. In other words, only a bottomline of over Rs 25 crore in fiscal 2000 can justify a price of Rs 960 for the scrip. Will STAR earn that much in the current year? A growth of almost 175% over last year certainly looks out of reach.

Confusing RSL!
This week's second new listing, RSL Industries Ltd, is surely going to confuse a lot not only the investors, but even the stock exchange authorities! On its BSE debut, RSL registered a maiden quote and trade of Rs 160 and 100 shares respectively on Wednes day. After a solitary quote and trade, the scrip has gone into oblivion on the next day. However, the most interesting aspect is, there are two companies in the same name! One is based at Kalyan (in Maharashtra). This company, formerly known as Radhika Synthetics Ltd, offered shares to public at a price of Rs 15 in August 1994.

Having an equity base of Rs 9.07 crore and engaged in synthetic/blended textiles, the company incurred a loss of Rs 1.55 crore during its first half ended December 1998. The share which was placed at Rs 2.85 on BSE in last October has since then been suspended as it had not complied with the listing requirements. The second RSL which was listed on BSE this Wednesday is based in Chennai. Formerly known as Ramco Super Leathers Ltd, this company diversified into cotton spinning in 1995 by acquiring an existing company. In 1996, it took over another company with a spindlage of 54000.

Interestingly, the company's recent advertisement does not include textiles in its product portfolio! RSL, Chennai, recently issued a bonus in the ratio of 1:1. The shares are currently quoted at MSE around Rs 162 on ex-bonus basis. Now, the most important question is, how to differentiate the two RSLs when BSE revokes its suspension on RSL, Kalyan? That problem won't arise, says BSE who is confident of the RoC doing theneedful!

Power of Lok Prakashan
Another recent listing on BSE is S Kumars Power Corporation Ltd (SKPCL) which is the fourth public venture of the Kasliwals. In fact, for the S Kumars group, this is the second new listing in two months. After the very successful launching of the country's first `dot com' public issue, the group floated SKPCL public in December with an equity issue of Rs 15 crore at par.

Expectedly, unlike the infotech issues, SKPCL received a subscription of only two times. The small investor category was subscribed by 32,855 people who all got shares ranging from 100 to 500 shares. Though the large investor portion was also subscribed two times, a single applicant -- the Lok Prakashan group put in an application for a whopping 50 lakh shares and got 23.21 lakh! On February 27, SKPCL made its debut on BSE at Rs 19.90 and closed the day lower at Rs 15.85, as selling mounted with a volume of over 3 lakh shares. Next day, it hit a low of Rs 13.55. With volume now receding to only a couple of thousands, the scrip has recovered to Rs 20. Nevertheless, its immediate course depends more on the mood of Lok Prakashan than anyone else!

[E-mail feedback to: investar@bol.net.in] (Arranged by INVESTAR -- The Aarthik News & Research Syndicate)