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Vikas WSP: Slip and slide

Raghuvir Srinivasan

IT has been an uncertain time for traders and investors in a market devoid of any firm directional trends. Though there have been short bursts of inspired trading, as the one on Tuesday when the Sensex gained 67 points, the general story has been one of dull trends with the indices moving sideways. However, there has been concentrated activity in specific stocks, such as Vikas WSP and Atlas Cycles

Stay away from Vikas WSP

It has been a roller-coaster ride for investors in the Vikas WSP stock, which touched new heights in the early part of this year only to drop steeply soon after.

It began with the company's plans to expand its capacity for guar polymers, a product used in the oil drilling industry. With an equity holding pattern of 54 per cent in favour of the promoters, 20 per cent with foreign institutional investors (FIIs) and 16 per cent with domestic financial institutions, the company planned to make a preferential offer to raise money for the capacity expansion.

The cost of the project was estimated at around Rs 195 crore, which the company planned to raise through a preferential offer of equity at a price ranging between Rs 1,000-Rs 1,200 per share.

Meanwhile, news about accounting irregularities in the company forced the stock steeply down. The company had to give up its plan of raising preferential equity and decided to go in for term loans to fund its project.

But the market had other ideas for the stock which started rising once again. Over the last one month, the stock has moved up from around Rs 395 to more than Rs 1,000. But in the last couple of trading sessions, including that on Wednesday, the stock tes ted the lower circuit filter of 16 per cent. It closed Wednesday's trading at around Rs 750.

The sharp upsurge and fall has now prompted the market regulator, SEBI, to investigate the factors surrounding the sudden burst of activity in the stock. It is quite apparent that the stock movements are being dictated by factors other than fundamentals. Any investment in the stock by common investors can be only at their own peril given the current volatility.

Jamna Auto-Springs up on hive-off

The stock of Jamna Auto has shot up from relative obscurity in recent times. Over the past fortnight, the stock has moved up from Rs 3.35 to Rs 8.45.

The company, which produces automotive springs, is an OEM supplier to Maruti Udyog and other vehicle manufacturers. It is now planning to hive off one of its units at Malanpur as a separate company and plans to offer a stake in it at a later stage to a c ollaborator.

The company has indicated that the transfer floor price would be the book value of the company. In the absence of further details on the move, it may not be advisable for investors to take positions in the stock. With Maruti being one of its major custom ers, the current upheavals in that company are bound to leave an impact on Jamna Auto. This factor also needs to be kept in mind by potential investors in Jamna Auto.