Traditionally ,Investing in stocks considered as a high risk high return game
compared with other opportunities like Real Estate ,Gold..etc.Even in stocks
itself the degree of risk -return is different in the case of Blue Chips,Large
Caps,small caps..etc.Investing in turnaround companies is a favourite option of
high risk takers to generate maximum return at the cost of highest risk.This
strategy not at all suitable for average
or below average risk takers .Investment in such stocks may make millionaire's
as well as bankrupts based on the accuracy of one’s calculations.What I mean is
, below two stocks are from such a category and suitable only for investors who
are even willing to forget their entire capital invested and also having enough
patience.
2 Ashapura Minechem
This company along with its subsidiaries are the largest
exporters of bentonite from India and one among the biggest five in the
world.In addition to bentonite, company is in the production of many other
minerals including sizable operations in Bauxite , Kaolin, Attapulgite, Barites..etc.Its
major product –Benonite- is widely used in metal casting, iron ore pelletizing,
civil engineering, drilling, paper,
detergents, cosmetics..etc. Bauxite is the basic ore for producing Aluminium.Company
was a darling of investors till 2008 and its share price (post FV split) was
around Rs.400-500 level.A big blow came in the form of the ban on export /sale of bauxite by the
government of Gujarat in 2008-09.Only because of this unexpected ban many issues
followed in the form of forex losses and claims by few shipping companies.Kaolin
plant in Kerala went into trouble on account of some local issues.All these
incidents derailed company’s operations and ends in big losses.New mineral
policy announced by Gujarat Government in 2009 -10 bring clarity in mining policy and
permitted bauxite mining again.But by that time company’s financial health
eroded a lot and it declared as a Sick company in 2012.After many month’s sincere
attempt by the management, now the company is in a recovery mode.Debt of the
company restructured and promoters brought more funds into the company by way of
subscribing 40,00,000 Equity Shares of Rs. 2 each at a price of Rs. 36.83 per
share and 40,00,000 Convertible Warrants to be converted into equity shares.Claims by shipping
companies are challenged by the company in court and case with one company already settled out of court.Management of
Ashapura expecting a favorable verdict in other cases too.On the financial
front company showing sharp improvement in past few quarters.In latest full
year company reported a Sales of Rs.771 Cr and its bottom line also showing
remarkable improvement even excluding other income component.
Due to environment related
issues ,entry of new players in this segment is not very easy now and probably
in future.This situation giving special advantage for existing miners .I
believe ,the testing time of this company is over and it is the time for a new beginning
in the history of this company .Currently stock is trading around Rs.42
NITCO
LTD
This stock once recommended around Rs.60 ( old posting HERE) which is
currently trading around Rs.15.Recently company received permission to
restructure its debt .As in the above case ,now promoters are making additional
investment of Rs.57 Cr by subscribing 22099206
shares at a price of Rs.25.20 each.Company is still a reputed brand in its
category and reported a turnover of Rs.800
Cr in latest FY 2012-13.
Conclusion
There is lot of companies moving between life or death situation.Reasons
may vary from fraud promoters,sluggish economic growth,adverse rupee
movement..etc etc.Even after restructuring or debt reduction only a few will
survive and regain their past glory .Promoters interest to bring back business
and their hard working is the moot point
deciding the success or failure.Among many of these companies ,the above
mentioned two cases deserves special attention not only due to the fund
infusion by promoters but because of the fact that even they are going through
tough times still they are reporting respectable top line in the range of
Rs.700-800 Cr each.I think ,their business are still viable and they can
recover from the trouble if properly managed .Promoters may be in a better
position to understand their SWOT by now.Hence I recommending both these stocks
for extreme risk takers .
Price History :
Company Name All time High Low(
UA) High Low CMP
( Un Adjusted)
(Adj*) (Adj)
Ashapura Minechem*
Rs.1212 Rs.9 Rs.567 Rs.9 Rs.42
Nitco Ltd Rs.336 Rs.12 Rs.336 Rs.12 Rs.15
·
* stock Split in 2006
Link to Ashapura Minechem Website HERE
Link to Nitco Ltd Website HERE
