Despite the volatility in the Indian share market due to the hawkish policy stance by central banks across the globe, some stocks have managed to deliver great returns to investors who took risks to invest in microcap companies. While investments in equities always involve risk, microcap or penny stocks are among the riskiest as they are highly volatile, but at the same time, they also carry a reputation of exceptional growth prospects. Rice milling company Kohinoor Foods is one such penny stock that has delivered skyrocketing returns to investors in the past 21 sessions following the revocation of suspension of trading in equity shares of the company on April 6, 2022. The stock last traded on May 3, 2021, after which the exchange had suspended the equity shares of Kohinoor Foods for non-compliance with listing obligation and disclosure requirements (LODR) as per SEBI Regulations, 2015.

Shares of Kohinoor Foods have delivered a 174% return to its shareholders in the past 21 sessions, with the stock price surging from ₹7.75 on April 6 to ₹21.3 on May 10. The stock has constantly hit the 5% upper circuit for the 21 straight sessions on the Bombay Stock Exchange (BSE). In contrast, the BSE benchmark Sensex dropped nearly 9% during the same period.

This means, ₹1 lakh invested in Kohinoor Foods at ₹7.75 apiece on April 6, 2022, would have turned into ₹2.75 lakh in just 34 days.

Kohinoor Foods, engaged in the business of manufacturing, trading and marketing of food products, currently trades under the T group on the BSE and under the BE (book entry) category on the NSE. Shares falling in the BE segment have to be settled by accepting or giving the delivery of shares and no intraday netting of positions is allowed.

There is no fundamental reason behind the recent surge in share price. The exchange had also sought clarification regarding the sharp rise in stock prices to which the company replied that they were not aware of the reason for significant movement in the price of its shares. One reason behind the rally in equity shares of Kohinoor Foods could be the company plans to raise funds. The company in an exchange filing on April 27, 2022 said that the board approved the proposal of raising of funds via rights issue to its eligible equity shareholders. The company plans to raise funds not exceeding Rs 49.50 crore through rights issue to the eligible equity shareholders of the company and the record date or ratio will be determined later by the board.

“The board has considered and approved the proposal of raising of funds by issue of such no of fully paid-up equity shares by way of a rights issue to the eligible equity shareholders of the company as on the record date to be decided later and in such ratio as may be determined by the board of directors, subject to the receipt of applicable regulatory / statutory approvals for an amount not exceeding Rs. 49.50 crore,” Kohinoor Foods said in a BSE filing on April 27.

Established in 1989, Kohinoor Foods is engaged in the milling, processing and selling of rice, and trading of food products and other agri-commodities. Over the years, it has emerged as one of the dominant Indian players in the global basmati rice market. The company has established its brand both in India and abroad in geographies like USA, UK, Middle Eastern countries, Australia, Belgium and other European countries.

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