From NCLT to upper circuit: The comeback of Alok Industries

Mumbai: If you had to guess a huge multibagger in the past month or so, chances are that a company clambering out of bankruptcy would not have led your list of wealth-builders. But shares of Alok Industries, a bankrupt company taken over by Mukesh Ambani’s Reliance Industries, have more than doubled in the past one month, hitting upper circuits for 17 consecutive times.

On Wednesday, too, the stock gained 5% to Rs 16.87, with more than 20 million buy orders on BSE and NSE. After the restructuring of equity, the stock was listed on February 27 at Rs 14 and declined to a low of Rs 3.92 on March 31. Since then, the stock has rallied 330%.

The Mumbai-based bankrupt integrated textile manufacturer was acquired by Reliance Industries along with JM Financial Asset Reconstruction Company last year after the Ahmedabad bench of the National Company Law Tribunal (NCLT) had in March 2019 approved their bid for Rs 5,050 crore.

As on March 31, RIL owned 37.70% stake in the company, while 45.67% of the stock was held by retail and high net worth investors.

“Alok Industries, which was in a perpetual bear run, is hitting the upper circuit nowadays,” said Abhishek Karande, senior analyst, Reliance Securities. “It may go up like Ruchi Soya but it is better that retail investors stay away from the counter as they will not find exit so easily.”

A similar kind of rally was seen in another NCLT company, Ruchi Soya. Shares of Ruchi Soya, re-listed on January 27 after consolidation of equity, rallied more than 40 times in just three months valuing the company at Rs 23,500 crore, more than that of Adani Enterprises, Gujarat Gas, Bata India, Voltas, Trent and TVS Motors. However, since May 18, the stock is ending in the lower circuit consistently and has lost 30% to close at Rs 515.60 on Wednesday.