According to an FE study of around 2683 quoted companies, around 543, or a staggering 20.2%, quoted below par as on October 15, 2008. And this number has more than doubled from the January end number of 215 companies (8%). Usually, in such a large universe of stocks, there will be many companies that would be trading below par or below their face value. But a 20% number is staggering and this will surely dent investor confidence for a long time to come, reckons a fund manager with a leading overseas fund.
Earlier on there were nondescript companies that were usually the ones that would be quoting below face-value.
But now we have companies like Arvind Products, Ashima, Dharamsi Morarji,G V Films, Indo Count Inds, K G Denim , Kopran and GTN Industries who feature amongst the list.
These, and others, are what market experts say are victims of volatile market conditions.
An analyst from a rating agency said: The current economic crisis globally has led to free fall in the equity markets and has shattered the investor confidence.
Though India is relatively insulated from global developments due to its huge internal consumption, it has also not been spared from the financial turmoil. So many companies are trading below their face value.
Most of these companies (below face value) have a gloomy outlook on their performance and bad financials. Hence, there is a huge insolvency cost involved. With liquidation procedure being a lengthy process, investors prefer to exit at the lowest possible prices in times of financial crisis, he added.
However, many of these can be attractive investment opportunities, especially when the markets turnaround. But spotting the right turnaround case requires savvy investing, he added.
Out of 543 companies , 328 companies were quoting above par on January 1,2008. Companies like Ace India, Abhishek Inds, Ambalal Sarabhai, Bell Ceramics and Birla Ericsson, joined in the list.