Did You Know: MAA Jagdambe Tradelinks is up 1000% in 12-months

MAA Jagdambe Tradelinks is a company whose profits over the last several years are less than Rs 1 crore, but the stock price is up over 1000 percent in 12-months.CNBC-TV18’s Varinder Bansal discusses the details of this company along with Menaka Doshi and Senthil Chengalvarayan.Bansal: Maa Jagdambe Tradelinks has a market cap of nearly Rs 800 crore, which is not a small company by any chance. The stock moved from Rs 8 to Rs 100 in one year that is a move of nearly 1,150 percent in one year. There was a stock split in the month of January, where the face value came down from Rs 10 to Rs 5. In case you incorporate that the gain is much higher. Earlier this company was known as Parasrampuria Credit & Investment. What does this company do? They say that they are into trading activities. They do a lot of advisory, consultancy, share of purchase, sales and investment in securities for its customers. What was the trigger for the stock price to move? Actually, it was in January 2013 when they allotted 1 crore shares to non-promoters and afterwards it was in July 22, 2013 when they allotted 3.725 crore shares to non-promoters at Rs 15 per share that was Bhangdiya who came in instead Parasrampuriyas. If you just see the total numbers of shares which moved from nearly 20 lakh shares to as high as 8 crore shares there has been 97 percent equity dilution done by this company. There is no financials to talk about but huge increase in the total numbers of shares. If you just study the share holding pattern which is very interesting for this company. Promoter holding is only 0.62 percent as a non promoter holding is 99.4 percent. The total number of shareholders only 325 in this company. If you go back last three years you will see how the promoter share holding has been changing. June 2012 the promoters held nearly 75 percent stake in the company which has come down to 0.62 percent and a total number of shares were only 20 lakh shares from that it went up to 7.8 crore shares because there was nearly 3.5 crore shares of preferential allotment a stock split which happened that is why there was a 97 percent dilution which happened. The financials has nothing to talk about this company in terms of what they did.If you just go back and see it was only in 2014 where they did sales of nearly Rs 27.5 crore but before that in the last three-years starting from 2010-2012 there was no sales done by this company. Profit after tax (PAT) if you look at the last 8-9 years of annual reports of this company – there is nothing that this company has earned and even if you club together everything the PAT doesn’t even equal to Rs 1 crore putting 8-9 years together for this company.The accumulated losses for this company as in March 2013 was nearly Rs 16.5 crore shares, there is an negative net worth of this company is Rs 11.9 crore and the cash flow is only Rs 60,000 for this company putting together 2013. Menaka: It is fascinating every company that you bring up in this segment has very similar patterns. Stock would be worth nothing, the financials are nothing then there would be some equity dilution placement of stock with some other unknown people promoter’s stakes will come down and in this process somehow the stock moves up 100, 200, 500 and 1000 percent. What is even more fascinating is this is happening with a company whose promoters have had a track record - a history of being punished by Securities Exchange Board of India (SEBI).Bansal: It is very important; you hit the nail on the head. I wanted to mention this that earlier the promoters of this company Parasrampurias they have been prosecuted and there is a case which is launched against them for valuation of SEBI especially in the case of Collective Investment Scheme Regulation 1999. All those shareholders which were there before 2012, Ratnalal Parasrampuria, Alok Parasrampuria Hemant Parasrampuria,Gayatri Parasrampuria,Sanjay Parasrampuria, Om Prakash Parasrampuria and all these guys they were shareholders in this company and still Alok Parasrampuria Hemant Parasrampuria are directors on the company and you can see their names on BSE also on the company’s website. The promoter’s legacy is also not fine with this company. No financials nothing.Menaka: This is the plantation one which is the collective investment scheme that he is talking about and unfortunately however you want to term this the promoters don’t have a clean record. And yet with the businesses that have already come under scrutiny and SEBI regulation is one thing. There are still other companies that started up or are on the boards of, you continue to witness this kind of unexplained run up in stock prices nobody does anything about it.Bansal: The only reason why we want to point out these company is that the valuations of these companies just don’t justify the kind of run up these companies have seen at all. I am even able to ignore the fact what promoters have done in the past or not. Even looking at the financials not even Rs 1 crore profits in the last 10 years but the stock price has moved 1,150 percent - no cash flows nothing in this business to even justify the kind of investment this company is doing which could help the company going ahead in next few years. Menaka: Is this stock frequently traded?Bansal: On a 10 day average nearly 80,000 shares for this company. Menaka: Could it be that the company is sitting on some large amounts of land or something like that, which might actually justify this increase in valuation even if it is businesses is not functioning well.Bansal: I studied their entire investments, asset base of the company that is why I am saying it is negative net worth, cash flows of only Rs 60,000. I studied their entire cash flows there is no cash flow into investment activities what this company goes on. 320 or 350 numbers of shareholders in this company, so you could do whatever you want to do within that 350 number of shareholders and this company the stock reacts the way you want.