Capital Markets is the place where everyone wants to try their skill, luck, destiny, etc. And there was a time when the market was only available to few but now with the emergence of technology, the number has increased so do the wrongdoings. When it comes to money people always fall into the trap of quick bucks but remember that only manipulators or riggers make a quick buck and also many such lucrative and heavily advertised schemes at the end of the day turns out to be a ponzi scheme or a new lesson for the Robinhoods' of the market for time to time. In front of the money even advise from the wise men are often ignored thinking that the few 100s shares which they own will make them rich overnight, but they don't understand that you are of the 1000s of other guys for the Big Shark or the Smart Money to take a safe and sound exit on the top.
GMM Pfaudler Limited is a leading supplier of engineered equipment and systems for critical applications in the global chemical and pharmaceutical markets. It is the two companies Gujarat based GMM and USA based Pfaudler. Such stocks are often termed as a value investment and been examples of many so called market experts advertise in their seminars and work shops that sich years before if you had invested so and so you would have been a crorepati, then why that same smart guy didn't invest is also a million dollar question! Everyone should follow discipline that any of the markets are not money printing factories, there is some hard core business lying behind it and if not then the bubble will burst sooner or later, no body can fool the market for too long.
Over a period of time, it may be multi-bagger but after the Corona breakdown in March 2020, this stock was going up with the rocket speed, here people should get conscious and use their brain, but the feeling of being left out or getting more and more out of few leads to the disaster and no one should blame then for their own failure. Also technically stock was in the blue sky zone above 3350 and the OFS has come at the perfect level of Rs.3500. Charts always help but people don't follow that charts are clear and cut foot prints of the smart money and no one can earn against the market trend. Company do have a great business but everything comes at a price, a few days back we saw the quick fall in the US Market led by the Tech Companies, our economy and the markets are both going in the opposite direction here in India as well as in US. Both are led by the money pumped into the markets by big shots and Robinhoods of the market. We should only eat according to our appetite similarly we should occasionally book profits also. Even Warren Buffet would have to change his theory of holding forever, in the chaos and noise created by the media and social media around us only adds to the volatility in the market which raises fear. There would always be opportunity lying around us and we cannot grab them all and we should always keep a distance from gaining quick bucks with big capital, even if you are next messiah of the market you shouldn't risk all your capital. Now those who are holding shares should give time to the noise to get settle and if company performs well then more you will get in the coming time. There is support around Rs.3900 but may not sustain and go towards the OFS price of Rs.3500.
The stock had correction in the Corona led break down in the global financial system around the world. And from that low of Rs.1817 slowly and steadily stock moved up around Rs.4300. From now the quick buck journey may have started which led the stock sky rocketing to Rs.6900. Then stock started moving down the news of the OFS took the stock down to the lower circuits for consecutive trading sessions.
Based on Monday’s price, the GMM Pfaudler stock was trading at a multiple of 105 times trailing 12 months earnings. In fact, the stock’s hardly cheap even at the floor price of ₹3,500, trading at a 70 times trailing earnings.
But GMM’s high valuations and the 33% discount in the OFS issue are not the only things that stand out in this story.
Securities lending and borrowing (SLB) data shows large borrowings occurred in the stock over the past one week. With the OFS announcement following soon after, and the steep ongoing correction in the stock, it raises suspicions. Needless to say, it is a matter for the Securities and Exchange Board of India (Sebi) to look into.
The biggest lesson for investors is that there are significant risks to just riding the latest wave or fancy in the markets.
It seemed like there is no stopping for GMM Pfaudler shares, especially after being backed by some popular fund managers. But who would have imagined that a large stake sale by an existing shareholder would bring a reality check to the valuations?
In all, a total of about 20.5% stake is being sold, which is striking, considering GMM’s free float earlier stood at 25%.
Typically, when demand for a low free float stock is high, then valuations keep moving further upwards owing to the short supply of the shares.
It’s worth noting now that as the supply of GMM shares increases substantially in the market post the OFS, there could well be further downward pressure on prices.
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