Yet, defying all odds
– a smalltime Bihar-based and Bihar-centric retailer – has beaten 2,642 stocks on BSE to top the chart for the first half of the year.
Shares of the electronics goods retailer surged a jaw-dropping 1,800 per cent in a space of six months. That was nine times the return made by the best performing largecap stock in the same period.
The stellar show helped the stock break into the top 1,000 club of companies by market capitalisation after being ranked 2,263th by Association of Mutual Funds of India (Amfi) in December.
While the ‘about Us’ page on the company’s website returns a ‘404 error’, its annual report for 2019-20 claimed it is the largest white goods retailer in Bihar with headquarters in capital city Patna. The company sells consumer electronic products by brands such as LG, Sony and Samsung at its brick-and-mortar stores.
The pandemic’s toll on the retailer has been similar to that of its peers, as the national lockdown and the subsequent hesitancy among customers to visit walk-in stores affected sales. Managing Director Yashovardhan Sinha said last year that the company had successfully migrated to an omni-channel model as was necessitated by the pandemic.
Factors that drove the rise
As has been the case with many other high-flyer stocks in the bull market, a major factor behind the extraordinary gains in the stock was its miniscule free-float. As per the latest shareholding pattern, only 3.2 million shares of the company are traded publicly.
Add to that the rise in interest from retail investors in the stock. In the March quarter alone, the number of retail investors owning the stock soared 642 per cent sequentially to 230. Consequently, trading activity on the counter rose significantly.
In the past six months, average daily trades on the counter has risen 10,113 per cent to 1,038 a day compared with a mere 10 in 2020. At the same time, the number of shares marked for delivery has nosedived 48 per cent in the first six months compared with that for the whole of 2020, data available on the BSE showed.
Institutional investors did not hold any stake in the company as of March 31, 2021.
Fundamentally, some factors have aided the strong investor interest on the counter. In its annual report for 2020-21, Aditya Vision said it aims to open a store in every district headquarter in Bihar and was exploring the possibility of venturing outside Bihar.
Further, the company’s earnings per share in the March quarter more than doubled sequentially, while operating margins expanded 287 basis points quarter on quarter to 9.26 per cent, suggesting that the company benefitted from the cost-cutting measures triggered by the pandemic.
In a mark of good corporate governance, the company’s board doubled dividend payout for 2020-21 to Rs 5 per share from Rs 2.5 in 2019-20, indicating a healthy practice of rewarding shareholders during periods of strong earnings.
What’s ahead?
At 29 times 2020-21 earnings, the stock is relatively cheaper compared with the average price-to-earnings ratio of its peers at 31.2.
The Refinitiv database has given a score of 8 on 10 in its monthly stock report, which is the best in class and significantly higher than the average score of 5.8 for its closest peers. According to Refinitiv, the stock’s momentum score currently stands at 10. However, there has been a notable rise in the risk component as its higher ranking raises risks of intermittent profit booking.
