Around 25% of actively traded shares on the Bombay Stock Exchange (BSE) are trading below their face value.
Shares of 3,249 companies, out of a total number of 5,386 listed on the BSE, were being traded actively (traded for at least 50% of all trading days in the last 12 months), and 856 out of these are quoting below their face value as on Friday. In fact, these 856 companies witnessed a 50% decline in their combined market capitalisation to ₹14,230 crore in the last one year.
A share has a market value and a face value. While the market value represents the value of the stock on the exchange, face value is the investors share in the capital.
Most of the companies trading below their face value are small caps, but there are a few big names like Alok Industries, Amrapali Industries, Jaiprakash Power Ventures, SRS and S Kumar’s Nationwide.
Alok Industries’ stock closed at ₹3.17 a share, less than half of its face value, on the BSE on Wednesday. Similarly, Amrapali Industries’ shares were quoted at ₹3.99, below its face value of ₹5 per, Jaiprakash Power Ventures shares were last traded at ₹5.1 and SRS shares at ₹7.1 per share, against their face values of ₹10 per share.
Typically, shares of companies, which are beaten down, are those with poor fundamentals and high losses. These companies reported combined losses of over ₹43,000 crore in 2015-16
The Bombay Stock Exchange last week delisted 194 companies, which have been suspended from trading for the last 13 years. As of August 17, 2016, the exchange had 5,577 companies listed on its platform, out of which 1,021 companies were suspended for seven years or more. Promoters of the delisted firms will now have to purchase shares from public shareholders at a fair value determined by an independent valuer appointed by the exchange. This is mainly done to free up investments.