Stock under Rs 10: Board of this small-cap company approves right issue; stock trades near its book value!

The book value per share of the stock is at Rs 2.28 and the stock is trading at 1.06 price-to-book value (P/B).

Stock market is a place where even the unimaginable is possible. And if you don’t believe me, this article will be an eye-opener for you. 

Indian Infotech and Software is a Small-Cap company that provides financial services to industrial enterprises and promotes companies engaged in industrial and trading business. It derives its income from interest on loans provided by the company. 

The stock was largely bound between 2016-2020. However, since November 2020 the stock started its dream run and from the low of Rs 0.15, the stock went on touch a high of Rs 12.88, which translates into a staggering return of over 8200 per cent in just 28 months. Isn’t it unimaginable returns?

I’m sure, you would say that this is a dream stock to have in your portfolio. However, this is the brighter side of the story, the other side will result in some pain because as the saying goes, price doesn’t move in a straight line, this turned out to be true for the stock. The stock in the next 11 months declined by nearly 81 per cent and it is currently trading at Rs 2.41. 

The stock is back in the limelight on D-Street after the board approved the proposal of raising funds through the issuance and allotment of equity shares. In the press release, the company said “Approved the proposal of raising of funds through issuance and allotment of equity shares having face value of Rs 1 (Rupee One Only) (‘Equity Shares’) for an aggregate amount of up to Rs 48,26,82,960 (Rupees Forty Eight Crore Twenty Six Lakh Eighty Two Thousand Nine Hundred Sixty Only) on a right issue basis, on such terms of conditions as may be decided by the Board of Directors of our Company to the eligible shareholders of the Company, as on the records date (to be notified subsequently) subject to the Securities and Exchange Board of India (Issue of Capital Disclosure Requirements), Regulations, 2018, Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements), Regulations, 2015, and Companies Act, 2013 and the rules made thereunder, as amended from time to time, (‘Right Issue’).” 

The book value per share of the stock is at Rs 2.28 and the stock is trading at 1.06 price-to-book value (P/B). Interestingly, despite the recent sharp correction, the stock is up by over 1168 per cent in the last three years as a result the stock has delivered multibagger returns to its shareholders. 

Do let us know in the comment section if you would subscribe to the right issue of this stock.