As the Indian stock market witnessed all-time highs in 2024, penny and micro-cap stocks were not left out of the rush, and shares of over 200 such companies soared between 300% and more than 75,000% in CY24.
What’s noteworthy was that 99 of these companies reported net sales of less than ₹10 crore in FY24, a figure that contrasts starkly with their inflated valuations and current market caps.
“The frenzy around obscure small-cap stocks mirrors the 2007 retail excitement before the global financial crisis,” Dhiraj Relli, MD and CEO, HDFC Securities, said in an Economic Times report.
“Many SMEs and small caps have seen their valuations skyrocket despite no meaningful improvement in business fundamentals.”
Invezz brings you five multibagger penny stocks that stunned the markets this year:
Shri Adhikari Brothers
Indian media and entertainment conglomerate Shri Adhikari Brothers saw its share price zoom in 2024.
While its year-to-date price stood at Rs 1,742.20, a gain of 59,975.86%, at its 52-week high earlier this month, the stock was up by a whopping 76,450% YTD.
The market capitalisation of the company, which posted Rs 3 crore turnover and Rs 21 crore loss in FY24, stood at Rs 4,420 crore on December 27.
Sri Adhikari Brothers Network has interests spanning broadcasting, films, content production, and publishing.
Aayush Wellness
Aayush Wellness’ share price was up by 3,534.08% YTD on December 27. Even with a revenue from operations of less than Rs 84 lakh in FY24, the market cap of the company stood at Rs 633 crore.
Aayush Wellness, founded in 1989, operates in health and wellness solutions business, focused on offering products that combine wellbeing with innovation.
Marsons
Manufacturer of distribution and power transformers, Marsons’ share price surged by a whopping 2,756.16% YTD. In October, at a high of Rs 349.40, the share price was up by 4,251%.
The company’s net sales in FY24 stood at Rs 6.5 crore while its net profit in the last financial year stood at 60 lakh.
BITS
The share price of BITS was up by 1,738.51% year-to-date. Its market cap stands at Rs 358 crore with a net sales of Rs 1 crore in FY24.
As per the company’s website, its primary business is to provide education in various fields, including Art, Commerce, Science, Computer Software, Computer Hardware, Business Management, Hotel Management, and Engineering & Technical Education.
Vantage Knowledge Academy
Vantage Knowledge Academy’s share price was up by 1,557.76% year-to-date on December 27. It’s market cap stands at Rs 2,150 crore.
The company reported FY24 net sales at Rs 4.3 crore while PAT at Rs 1.4 crore.
The company is engaged in the business of education and publication.
Why penny stocks must be invested in with caution
Despite the stellar returns, it should be noted that penny stock, especially those trading below Rs 100, carry risks like low liquidity, high volatility, and often inadequate financial transparency.
A high book value might indicate that a company possesses significant assets relative to its market price, potentially hinting at an undervalued opportunity, but it is important to approach with caution as these assets may not always be liquid or accurately valued.
Further, book value alone fails to capture critical factors like earning potential, market position, or financial stability.
In August, the Indian markets regulator SEBI warned investors about the risks of investing in shares of obscure companies, citing cases where certain small and medium enterprises (SMEs) engaged in price manipulation by creating a misleading image of their operations.
SEBI pointed out that after listing, some SMEs or their promoters issued public statements to portray a favourable outlook for their businesses, often followed by corporate actions like bonus issues, stock splits, and preferential allotments to sustain the illusion.
By October, SEBI had acted decisively against Trafiksol ITS Technologies, canceling its SME IPO and ordering the company to refund investors’ money after uncovering serious irregularities.
“Retail investors, driven by FOMO (fear of missing out) and unverified social media tips, are blindly funneling money into these stocks without proper due diligence,” said Relli of HDFC Securities.
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