Indowind Energy: Case Study on Rights Issue in Penny Stock: Risk or Opportunity?

  • Stock Market Analysis
  • Editors Pick

Since the last 2 trading sessions, a Penny stock is hitting a 5% upper circuit after announcing the rights issue.

Company background:

Indowind Energy (NS: INWI ) Ltd is an independent power producer generating green power through dedicated wind farms and also offers allied services in the wind energy sector. It offers services to various stakeholders in the power industry such as green power sales, project management services, asset management services, and value-added services. The company generates a majority of its revenue from the sale of power. The market capitalization of the company is 121 crores including it in the penny stock list.

Indowind Energy Ltd stock closed @ Rs 9.20 on the last day of the financial year end (31st March 2023) and thereafter was locked in the 5 percent upper circuit for the last 2 days (Rs 10.20 closing today).

Recent announcement:

It was observed that In a recent filing with the exchange, the company, after a couple of adjourned meetings, announced that the Board considered and approved the rights issue and allowed 1,75,93,294 Equity Shares at Rs 12 per Equity Share (including a premium of Rs 2 per Equity Share). Apart from the above, a scheme of Amalgamation between Indowind Energy Ltd and Ind Eco Ventures Limited (an unlisted wholly owned subsidiary of the company), was proposed with a rationale of savings of operational costs and access to new markets, customers, and channels.

Past Financial History:

It is observed that the revenues, as well as the net profits of the company, have decreased in recent quarters. Revenues reduced from Rs 14.6 crores in Q2 to Rs 7.1 crores in Q3. Net profits, showing similarity, showed a downward shift from Rs 3..92 crores in Q2 to Rs 0.06 crores in Q3.

On a YoY basis, the ROE and ROCE figures of the company have shown a reduction with ROE moving down from 0.12 percent in FY20-21 to 0.06 percent in FY21-22. ROCE went down from 0.8 percent in FY20-21 to 0.71 percent in FY21-22.

Something positive to note is the reduction in the debt-to-equity ratio from 0.27 in FY20-21 to 0.25 in FY21-22.

Conclusion

Investments in penny stocks involve certain risks.

Support @ 8.80 ~ 8.65 was visible and the current reversal trend is suggesting more upside.

However, with the yearly result just around the corner, we need to wait for year-end results as well because any further losses or reduction in ROCE (even after the somewhat positive news of amalgamation) we could see the stock tumbling down even below the 52-week lows of 8.65

Stay tuned for more updates post the Q4 + year-end result.

Disclaimer: The above article is for self-educational purposes. The research was conducted by the following students: G10 and DJ for learning purposes.

“Investing involves substantial risk. Neither the author nor the publisher, nor any of their respective affiliates make any guarantee or other promise as to any result that may be obtained from using the research/report. While past performance may be analyzed in the research, past performance should not be considered indicative of future performance. No reader should make any investment decision without first consulting his or her own personal financial and/or investment advisor and conducting his or her research and due diligence, including carefully considering whether it is suitable for your particular circumstances, as this research/report does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendation appropriate for you. In the event, that any information, commentary, analysis, opinions, advice, and/or recommendations in the research/report prove to be inaccurate, incomplete, or unreliable or result in any investment or other losses, the author, the publisher, and their respective affiliates disclaim any and all liability to the maximum extent permitted by law.”

Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

Error: File type not supported

Drop an image here or

100
  • JET AGE @JET AGE
    Circuit revised to 20% and price is again above 12+
    Like 0
  • JET AGE @JET AGE
    Circuit is revised to 10% and stock price is above 12+
    Like 0

Related Articles