From a triple-digit PE stock to a single-digit; what went wrong with once termed as best multibagger SME stock?

The million-dollar question is, what caused this sudden nosedive in the stock's value?

In the grand tapestry of our thoughts, it's the little words that often carry the most profound weight. Small elements possess the remarkable ability to evolve and become more efficient with the passage of time. Throughout corporate history, we've witnessed countless instances where pint-sized companies, armed with meager resources, have managed to outshine their larger, established counterparts, leaving them in awe. It's no wonder the age-old wisdom endures: "small is beautiful."

Now, let's venture into the captivating realm of the stock market, where the pint-sized players have been known to deliver colossal rewards. Just in the past year, the smaller stocks have shown their might, boasting returns that are more than twice the size of their larger counterparts. This is the siren's call that beckons adventurous investors to explore the Indian stock market, in pursuit of those outsized gains from the world of the tiny titans.

Welcome to the exhilarating universe of Small and Medium-sized Enterprises (SME) platforms on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Here, names that might not even ring a bell among the masses suddenly burst onto the scene with initial public offerings (IPOs), challenging the big boys and taking them head-on in the race for stellar stock returns.

However, let's not get carried away by the enchantment of India's SME stocks and their supernormal returns, for we don't want to sound like persuasive monologues from a sharply dressed Jordan Belfort, also known as "The Wolf of Wall Street." It's time to pause, take a breath, and regain our composure, especially if you were considering diving into the world of SME stocks this coming Monday. As they say, the devil is in the details.

In the exuberance of a bull market, concerns about valuations may take a back seat. Yet, this is precisely the kind of pitfall that one should avoid when dealing with SME stocks. Keep in mind that SME stock investments are considerably weightier than your typical purchases. While in other stocks, you can buy just a single share, such a luxury isn't readily available in the world of SME stocks. So, you're likely to commit a substantial amount of your capital.

It's imperative for investors to understand that the lower liquidity in SME stocks means that even small investments by a handful of participants can send stock prices, and subsequently their valuations, soaring into the stratosphere. Poor liquidity also escalates your impact costs during both entry and exit. Remember, not all SME stocks see regular trading action.

Now, let's delve into a cautionary tale of investors who got their fingers burned with a particular SME stock – Varanium Cloud. This stock once soared to incredible heights, delivering a jaw-dropping 10x return in a mere blink of an eye. It was hailed as the SME multibagger stock, and the market couldn't get enough. The stock's price-to-earnings (PE) ratio even breached the elusive three-digit mark, exceeding 100x in the early part of this year.

Fast forward to today, and the narrative takes a dramatic twist. The stock now trades at a modest single-digit PE ratio, lingering below 10x, and its price has plummeted to less than half of its lofty peak in January 2023. The million-dollar question is, what caused this sudden nosedive in the stock's value? The answer: a red flag in corporate governance.

Investors are seething over the non-receipt of dividends, and their attempts to contact the compliance officer went unanswered for a while. However, a recent development suggests a glimmer of hope. The company has stepped forward, stating, "We have now resolved all issues with the bank on paying out any remaining dividend payments, and the files are being processed since last night. Shareholders are requested to please reach out to info@vrnm.com."

The stage is set, and the spotlight now turns to you, the shareholders. Have you received your dividends as promised? The comment section awaits your verdict.

Disclaimer: The article is for informational purposes only and not investment advice.