What should ideally trigger a rally in a particular stock? Bumper profit, hefty dividend, liberal bonus, mega acquisition or something else? At a time when even fundamentally strong companies could not do much to save investors from huge capital loss caused by the current turbulent market, some of their lesser-known counterparts have, in fact, found solace in what was rampantly seen during IT and realty boom - rechristening.
There has been a mad rush to change names with as many as 17 companies doing so in August and 36 in the past three months. Generally, a company changes name to clearly reflect the nature of the industry or if it is diversifying into another business. But, if such a move causes an instant upswing in the share price, there could be more than what meets the eye, particularly where fundamentals are poor, say analysts. A new name, preferably with words like 'infrastructure', 'energy' and 'power', has apparently worked magic for shares of some of the recent name changes. The sharp gains, however, are not supported by good fundamentals or any positive announcements. This has raised suspicion among analysts as to what could have pushed up the shares even amid unfavourable market conditions. In the past, Sebi had cracked down on many promoters after investigations revealed that they connived with operators to rig share price and mislead investors. Some analysts feel not all companies change names with an intention to mislead investors. Sometimes a dormant company goes for a change in name as part of strategy to turnaround itself, they say. "There could be genuine interest behind changing names but some companies may be doing it with malafied intention," said Prime Database managing director Prithvi Haldea. In the past, promoters of unlisted companies with huge land bank were seen taking management control of weaker but listed companies through open offer and helping them revive through diversification into the realty sector, he said. According to Karvy Stock Broking vice-president Ambareesh Baliga, the trend is prominently evident when a particular sector is doing well. "It is a normal phenomenon which, however, can mislead investors if the purpose behind changing name is not genuine. Small investors have shown tendency to fall pray to such tricks many times in the past," he says. ET has spotted a few examples of name changing companies whose stocks have widely outperformed the current market. While past financials of most of them inspire hardly any confidence, there is, however, no evidence established by Sebi or stock exchanges which could prove there was any foul play behind the spurt in the stocks. Analysts feel investors could be falling for such low-priced stocks in anticipation of a change in fortunes with promises diversification into high-growth sectors like power and infrastructure. Brahmaputra Infraproject (formerly Mewar Industries) is one notable example where the stock shot up nearly 50% against a 1.5% fall in the Sensex in the past one month. On August 29, the scrip scaled a new high of Rs 50.4 even after the company made a preferential allotment of 40 lakh shares at a price of Rs 10.8 to its promoters. The promoters, currently holding 35.5% stake in the company, have made an open offer to acquire 20% equity at Rs 11 per share, over 70% discount to the current market price. Despite repeated efforts, the promoters could not be contacted for comments. Brahmaputra Infraproject posted a meagre net profit of Rs 2 lakh on sales of Rs 27 crore during year ended March 2008. Given these facts, analysts feel though the rally was not based on strong ground, the action in the counter could be because investors have some belief in the management. But, again investor participation in the trading has not been sufficient to strengthen this possibility. Volumes remained low between 200 shares and 28,333 shares in the past one month. SCIL Ventures and Vikas Granaries are the two other companies where the stocks have outperformed the broader market, gaining 38% and 25%, respectively, in one month. Their past performance, however, is relatively better. While the former recorded a net profit of Rs 14.4 crore on sales of Rs 16.6 crore in FY08, the figures stood at Rs 2.4 crore and Rs 16.6 crore, respectively, for the latter http://economictimes.indiatimes.com/Promoters_change_names_to_escape_bears/rssarticleshow/3460395.cms ekamber The greatest lesson in life is to know that even fools are right sometimes. ---Churchill --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "Kences1" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [EMAIL PROTECTED] For more options, visit this group at http://groups.google.com/group/kences1?hl=en -~----------~----~----~----~------~----~------~--~---
