Mystery Of A Zero Revenue Company With Rs 5,500 Crore Market Valuation

Humour this: a company becomes profitable after a long list of loss-making quarters on the back of other income alone. The stock subsequently hits upper circuit two days straight in an apprehensive market. Market cap swells some Rs 260 crore to rise past Rs 5,500 crore since the results .The kicker is that the company reported nil revenue for the quarter that sent share prices soaring. The company in question is LS Industries Ltd. It posted its December quarter earnings last Friday with a net profit of Rs 3.2 crore against a loss of Rs 9.68 lakh in the year-ago period.With the bottom-line improving, the stock hit an upper limit of 5% for the second session on the trot today even as benchmarks trade with losses. It had done the same a day before during the special Budget market session on Saturday, when stocks broadly saw muted movement. In the past three months, the stock has given negative returns of 8%, but returned 86% in six months and 497% in the past year.What stands out in LS Industries' results is that the company turned profitable on the back of income growing led by other income alone, however, none of it came from operations.Total income of the company grew to Rs 3.49 crore during the quarter, up from Rs 11 lakh during the year ago period, as well as the quarter that came before.The total income was made up entirely of other income, which is not clarified in any notes to accounts provided in the filing.While the independent auditor's review report given by Sangeet Kumar & Associates mentions that the profit and loss statement has been prepared in accordance with Indian Accounting Standard, they also mention that "a review is substantially less in scope " and do not express an audit opinion."A review is substantially less in scope than an audit conducted in accordance with Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.".As per shareholding data with BSE, LS Industries conforms to the regulatory mandate of keeping 25% shares in free float for public trading. However, a closer look at the data shows little over 1.64% is actually available for free trade. From the 21.83 crore share officially in free float, around 10.28 crore are with an NRI shareholder Jahangir Panikkaveettil Perumbarambathu. Another 10.14 crore shares are held by foreign shareholder Chee Ai Liew.This leaves a little over 1.41 crore shares, or only 1.67%, for the rest of the public shareholders to buy and sell.There is little liquidity, as well, as seen in average volumes. Average volume as a percentage of free float shares stands at 0.006%, while average volume as a percentage of effective free float is 0.096%..As per the financial results, LS Industries is engaged in the textiles business, and has only one reportable segment in accordance with Indian Accounting Standards. This doesn't match the basic industry categorisation of "Trading - Minerals" assigned to the company on BSE. What's even more curious, is that the board of the company proposed to change its name to "AI Tech Limited", as per an outcome of meeting held on Oct. 7, 2024.According to the shareholding pattern for Dec. 2024 reported to the exchange, the company only has one promoter entity — Profound Finance Pvt.For investors, it bodes well to look at the long-term performance of a stock instead of running after sporadic gains..NDTV Profit Impact: SEBI Exposes 'Zero-Revenue' LS Industries’ Rs 5,500-Crore Valuation As Stock Scam

Mystery Of A Zero Revenue Company With Rs 5,500 Crore Market Valuation

Why a company with effectively zero sales has been hitting upper circuit for two days? The answer lies in shareholding.

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