An analysis of institutional ownership in penny stocks, as defined by those with market capitalisation below Rs 1,000 crore and share price below Rs 25, shows that FIIs hold over 10% stake in a dozen such counters.
Out of them, 7 have given double-digit returns in FY24 so far. Here’s the full list:
1) Globus Power Generation
Jaipur-based clean energy company Globus Power Generation has seen FII holding stable around the 18% mark in the last four quarters. The stock has rallied around 64% in FY24 so far. Foreign investors in the company include Elm Park Fund, Ares Diversified and Eos Multi Strategy Fund.
2) Nectar Lifesciences
Chandigarh-headquartered pharma company Nectar Lifesciences, which has rallied 56% in the financial year, is 16% owned by FIIs. But mutual fund holding is below 1%.
3) Visa Steel
FII ownership at Kolkata-based Visa Steel, which was admitted to NCLT in November 2022, has seen FII holding stable at 21.95% in the last 4 quarters. The stock has rallied over 53% so far in FY24.
The company owes lenders led by SBI a total of Rs 3,400 crore. Besides SBI and PNB, the other lenders to the company are Bank of India, Bank of Baroda, Union Bank of India and Canara Bank.
4) Dhanlaxmi Bank
Private sector lender Dhanlaxmi Bank, which swung to profit in June quarter with a net profit of Rs 28 crore, has rallied 46% this financial year. FIIs owned around 11% in the company as on June-end.
5) Sampann Utpadan India
Sampann Utpadan India, which is engaged in power generation through wind energy and rubber reclamation from waste tires, has rallied around 35% YTD and comes with FII ownership at 12.21%.
6) Vikas EcoTech
New Delhi-based Vikas EcoTech, which sells specialty polymers and specialty additives and chemicals for plastics & rubber industries, has seen a 23% rise in its market value this fiscal. FII ownership, which was negligible in March quarter, has now crossed 15%.
The Rs 350 crore company has recently announced foray into conventional energy segment after receiving a Rs 20-crore coal supply order from cement manufacturer Prism Johnson.
7) Yaari Digital Integrated Services
Indiabulls Group-backed social commerce platform Yaari’s FII ownership was at 11.66% in June quarter. The stock has given more than 20% return this financial year. The company’s market value was less than Rs 130 crore. FII backers include Steadview Capital and TIMF Holdings.
What should investors do?
Often seen by retail janta as a sureshot way to double or triple money quite easily in a short period of time, penny stocks usually end up eroding wealth. Many new investors go out looking for stocks priced below Rs 20 or Rs 50 under the impression that a low-priced stock is cheap and a higher priced one is expensive.
However, price and value are like chalk and cheese. A penny stock can be expensive at Rs 10 while a Rs 1 lakh share can turn out to be cheap.
“In certain instances, the shares of a company may offer attractive valuations despite being outside an investor’s accessible range. Identifying such opportunities requires diligent research, a comprehensive analysis of the underlying fundamentals, and maintaining a flexible mindset. Therefore, investors should strive to educate themselves continuously and adopt a long-term perspective when analyzing high-priced stocks and not reject them just because their prices are ‘too high’,” said Jimeet Modi of Samco Securities.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)