Droneacharya Aerial Innovations, which listed about two weeks back on the BSE SME platform, is making many greedy and scared at the same time.
The stock, which is backed by Shankar Sharma, has delivered over 300 percent returns, quadrupling shareholders’ value of holding in just 15-odd days, leaving many who missed the opportunity during the initial public offer (IPO) disappointed.
The stock that got listed at Rs 54 in December is now trading at Rs 220. In the process, it has hit the upper circuit limit every day. Even on Tuesday, the stock zoomed 10 percent and there were hardly any sellers in the stock, even as buy orders piled up.
This incessant rally also lifted its valuations to astronomical levels. The company is valued at Rs 529.67 crore now.
Droneacharya Aerial Innovations, which reported revenue of Rs 3.58 crore during fiscal year 2022, is now valued at 148 times its sales. Its valuation has eclipsed that of several Adani Group firms that have been criticised for their frothy valuations.
In terms of price to earnings (PE) ratio, it is trading at 649.41 times its FY22 earnings. Compared to all companies listed on the BSE and the BSE SME, it is among the top 25 most expensive stocks.
“Berserk valuation,” said Lalit Kumar Rathi, a financial advisor, on Twitter. “Gives me a feel this is going to end badly (sic).”
Droneacharya got a massive number of applications during its IPO. The company provides drone solutions for multi-sensor drone surveys, data processing of drone data, drone pilot training and specialised GIS training. Many see high future value in the niche business.
Also read 17,000% return in 10 years but this market segment is a tough nut to crack
SME stocks have seen massive value creation – evident from over 17,000 percent returns in the BSE SME IPO index – in the last decade, but that has also made them susceptible to sell-offs when they migrate to the BSE Mainboard or the NSE Mainboard. Data shows, overall, half of the stocks that migrated to the mainboard have delivered negative returns from their respective migration date.
Analysts and fund managers have cautioned investors to be aware of the risks when investing in SME stocks. Even as many of them make money, low liquidity can make it difficult for investors to sell their holdings when they want to.
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