This smallcap turned Rs 10,000 to Rs 7 lakh in just 89 sessions; should you invest in this multibagger?

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Shares of Orchid Pharma hit the upper circuit for the 89th session, up 5% at Rs 1,307.55 on March 10.

The scrip has soared 7,164% from Rs 18, since its relisting on November 3, 2020.

The growth in share price shows that an investment of Rs 10,000 in the company in November last year is now worth Rs 7,26,417. The benchmark BSE Sensex has gained 27% during the same period.

Market watchers are, however, cautious on this counter due to very thin volume on exchanges.

“Volume is an issue for Orchid Pharma,” said independent market analyst Ambareesh Baliga.

Kranthi Bathini, director of WealthMills Securities, concurs with Baliga.

“This is the like Ruchi Soya which also touched sky after relisting on bourses last year. I would advise investors to stay away from considering the negligible volumes in the counter,” he said.

A similar kind of movement was seen Ruchi Soya last year when Ramdev’s Patanjali Ayurved paid Rs 4,350 crore to take over the company. Shares of Ruchi Soya moved surged over 4,000% to Rs 701.25 on May 18, 2020 after re-listing at Rs 16.90 on January 27. At present, the scrip is trading at Rs 725.

On the BSE, 769 equity shares changed hands till10.25 am (IST) against a two-week average volume of 2,887 shares.

At present, Orchid Pharma is trading under IRP: Stage 2 on the BSE. In the IRP segment, an additional surveillance mechanism by the exchanges is applicable to such stocks. Intraday trading and BTST are not allowed and 100% margins are applicable.

IRP stands for Corporate Insolvency resolution process.

Last year, Dhanuka Laboratories acquired Orchid Pharma as per an insolvency resolution plan that was approved by courts and the debt-laden company’s lenders.

The company said in a stock-exchange filing a monitoring committee overseeing its resolution plan has decided to extinguish 99% of its share capital and allot zero-coupon debentures with a face value of Rs 3,650 crore to Dhanuka Pharmaceuticals (SPV formed by Dhanuka Laboratories).

The latest shareholding data shows that promoter Dhanuka Laboratories held a 98.04% stake in the company as of December 31. On the other hand, retail investors had just 0.51% stake, while financial institutions and foreign portfolio investors had 1.19% and 0.01% stake in the company.

For the quarter ended December 31, the smallcap firm posted a loss at Rs 45.33 crore against a loss of Rs 34.75 crore for the corresponding quarter last year. Net sales declined 20.18% to Rs 102.63 crore, from Rs 128.58 crore in December 2019.