"We believe the trigger for the current panic is that Padam Chand Gupta, one of the two promoters, gifted nearly 2 percent of his 26 percent holding in the company to an undisclosed relative," says Akash Jain, Vice-president, Equity Research at Ajcon Global Services.
PC Jeweller informed the exchanges that its board will meet on May 25 to consider a proposal to buyback its shares. Despite this, the stock continues its losing streak.
The stock lost 24 percent intraday today to hit a 52-week low of Rs 110.10 on the BSE and shed 63 percent in 8 consecutive sessions since April 20, 2018.
"A meeting of the company's board of directors will be held on May 25 to consider a proposal to buyback fully paid-up equity shares of the company," the company said in its filing. The board will also consider and approve the audited standalone and consolidated financial results for the quarter/financial year-ended March 31, it said.
We gave a view on this company after analysing its fundamentals and business prospects. We were also surprised with the fall in its stock price. Before recommending it to anyone, we relied on the company’s profit and loss account, balance sheet and business prospects as presented by it in its analyst meet and investor presentations. Aggressive store expansion and the presence of auditors like Walker Chandiok & Co LLP gave us the impression that the company was on the right path. We always believe in recommending companies whose promoters’ integrity is not questionable.
The stock on Monday had fallen 23 percent from the day's high as the share buyback proposal failed to allay concerns over rumours of a promoter stake sale. This has knocked Rs 20,000 crore off the jeweller's market value this year.
A share buyback proposal suggests the promoter feels the value the market is ascribing to the underlying business is lower than what it should be.
The current panic was triggered by promoter Padam Chand Gupta, one of the two promoters, who gifted nearly two percent of his 26 percent holding in the company to an undisclosed relative. This raised concerns on whether there may be more such deals in the future.
PC Jeweller's management told the exchanges it is not aware of the reasons behind the sudden decrease in its share price. "We would like to assure investors, shareholders and other stakeholders that the fundamentals of the company remain strong and it continues to move ahead on the growth path," it said.
The management said none of the promoters had sold any stake in the market. "One of the promoters, Padam Chand Gupta, has gifted some of his shares to family member(s) through off-market transactions. The company is already making the requisite disclosures in this regard from time to time."
Recently Balram Garg, MD and CEO of PC Jewellers said Vakrangee has sold all its stake in the company. The stock came under pressure in February after Vakrangee purchased 20 lakh shares at Rs 561.71 apiece on January 25 aggregating Rs 112.32 crore.Disclaimer: The author is Vice-president, Equity Research at Ajcon Global Services. The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.