One-fourth of listed cos trading below face value

Written by Pradip Kumar Dey | Mumbai | Updated: Mar 4 2009, 05:52am hrs
Shares of almost a quarter of the companies listed on the stock exchanges are trading below their face value. As on Monday, 24% of the the 2,450 quoted companies were quoting below par, compared with 12% on March 3 last year.

Among the 577 companies that were trading below par are big names like Abhishek Industries, Birla Ericsson, Deepak Spinner, Escorts Finance, GTN Industries, Ispat Industries, JCT, Kopran, Lloyd Steel, Spic, TN Petro Products, Vishal Exports and Yash Paper.

These companies, say market experts, are victims of volatile market conditions.

The global economic crisis has led to a free fall in the equity markets and has shattered investor confidence. Though India is relatively insulated from global developments due to its huge internal consumption, it has not been completely spared from the financial turmoil. So many companies are trading below their face value, said an analyst from a rating agency.

Most of these companies (quoting below par) have a gloomy outlook on their performance and bad financials. So there is a huge insolvency cost involved. With liquidation procedure being lengthy, investors prefer to exit at the lowest possible prices in times of financial crisis, he added.

Incidentally, out of the 577 companies that are trading below their face value, 343 were quoting above par on March 3, 2008. Among these companies are Andhra Petrochem (Rs 24.50 as on March 3, 2008, down to Rs 9.11 on March 2, 2009), Axon Infotech (Rs 43.05 to Rs 8.90), BSEL Infrastructure (Rs 47.55 to Rs 8.26), GTN Textiles (Rs 16.65 to Rs 5.59) and Maral Overseas (Rs 15.85 to Rs 4.72).

On the other hand, seven out of the 324 companies that were quoting below par on March 3, 2008 were quoting above par on March 2, 2009. Significant among them are Bluechip Tex Inds (Rs 9.85 on March 3, 2008, up to Rs 14.80 on March 2, 2009), Super Tex Industries (Rs 1.18 to Rs 19.25) and Torrent Cables (Rs 9.04 to Rs 59.45).

The upturn in these companies fortunes on the stock exchanges can be attributed to their yearly profit performance. Net profit of Super Tex Industries, for instance, increased from Rs 0.01 crore during October-December 07 to Rs 0.20 crore during October-December 08.