PC JEWELLERS – YEH KYA HO RAHA HAI?

By Ruma Dubey

The one question on everyone’s lip – what exactly is happening in PC Jewellers?

Last week, 27^th April to be more precise, the stock hit a new low and in that one single week, it lost over 25%. And throughout the fall, there was no real reason, only rumours that promoters were selling stake and someone else saying that Vakrangee was selling stake.

The stock exchange had asked the company for clarification on this sharp fall in stock price and the company reverted saying that its fundamentals remained intact and there was really no real reason. Seriously? No fundamentally sound company ever reports such a precipitated fall of over 25%.

After hitting a new low at Rs.157 on 27th April and continuing to breach the LC, the stock price today morning shored up in the opening bell session, rising 18% - it was the top gainer. This was a reaction to its announcement that it would be making a buy back offer on 25^th May. But just as mercurial as its rise, it too fell equally fast – it is now the top loser and hit a new low too. Moving like a yo-yo, how is one expected to believe the management when they say that ‘all is well?’

This is not a new thing in this company. In Feb’18, a similar yo-yoing happened. The stock price plunged 60% ( strangely it did not trigger the LC) on panic selling by investors on speculations that the promoters might have business relationship with IT firm Vakrangee – that’s a big no-no because Vakrangee is being probed by Sebi for possible stock manipulation. Why would an IT company look out for investments in a jewellery maker? 

At that time too, the management issued a clarification saying that none of its promoters had diluted stake in the company, none of their shares are pledged as collateral with any institution and said its fundamentals remained strong.

The management keeps on saying that the promoters did not dilute shares but the shareholding record shows that total promoters holding in PC Jeweller declined to 60.24% in Q4FY18 v/s 60.54% (QoQ). The explanation could be that PCJ had convertibles which got converted to equity brought down promoter stake not total shares.

The company clarified that one of its promoters Padam Chand Gupta gifted some of his shares to his family member(s) through off-market transactions. The issue is not about gifting – were the shares sold the moment they were given as gift? The seller made tonnes of money, leaving investors in a lurch.

Maybe the market is punishing the company for selling shares in a non-transparent manner for raising money through the ‘gift’ way. That, for the market in the Nirav Modi era, is a big red flag.  Yes, the Nirav Modi and Gitanjali scam too has spooked the market and wherever there is even a doubt, punters are fleeing.

Such a stock is labelled as “Pump and dump” stock where operators push the prices higher, and dump those at higher levels

The question is – when a company calls itself fundamentally strong, how come its stock price is open to such massive manipulation. In this stock, if this is not operators at play, what else could be the explanation?

One cannot help but question the integrity of the promoters. Their announcement  of this buy back seems more like an effort to shore the stock price and hike their own stake but why by using the shareholders fund?

In 2017, they issued bonus shares and after that promoter group started selling shares. That time too, they used shareholders funds first to increase the number of shares and then started selling. This should seriously set one thinking.

What is also spooky is that there is too much similarity between the modus operandi of PC and Vakrangee, which also declared abuyback. Its been two months since then and no update on that except appointment of merchant banker. In PC Jeweller too, the Board meeting is 25 days away… giving them enough to work on the price? Why announce now when Board meet is so far away?

Stay away from PC Jewellers. That’s the sincere and most logical advice. There is something big and foul at play here. It may or may not surface; maybe it’s the bear cartel at work. Whatever be the reason – when such rampant manipulations happen, the only question to be asked – should you trust your money with such a management?