Shares of Vegetable Products Ltd, an edible oil products manufacturer with zero revenue in 2020-21, have zoomed more than 200% in just 21 sessions. Not just in the short-term period, this penny stock has delivered unbelievable returns of nearly 1,000% to its shareholders in the last one year amid investors’ craze for small stocks, despite weak fundamentals.
With the benchmark indices stuck in a relatively boring trading range, investors have turned to much riskier penny stocks to generate massive returns. Penny stocks, which are very cheap and have low market capitalisation, are not very promising investment opportunities, but they are on everyone’s radar at the moment, and social media platforms are fueling the craze.
Vegetable Products, which was formed in 1953 with the manufacturing of vegetable edible oil products under the ‘Pratap Vanaspati’ brand, has delivered massive returns to its investors, illustrating the insatiability of animal spirits in general. The stock outperformed sectoral peers despite reporting dismal financial performance. The company posted a loss of ₹15.60 lakh during the financial year 2020-21, while its turnover during the year was nil due to the discontinuance of production since July, 2011. Its paid-up equity share capital as on March 31, 2021, was ₹10.92 crore.
The smallcap stock, operating in the edible oil and solvent extraction sector, rallied as much as 985% over the last one year period, from ₹2 on December 28, 2020, to ₹21.17 as of December 28, 2021. In contrast, the BSE Sensex, which measures the market capitalisation of the country’s top 30 stocks, surged 22% in the past one year, and the NSE Nifty climbed 24% during this period.
In the calendar year 2021, Vegetable Products share price soared 832%, while it gained 476% over the six-month period and 204% in the last one month. The stock has witnessed relentless growth even in the long term, soaring 340% in five years, and 684% over the two-year period. The market capitalisation of the company currently stands at ₹231.18 crore.
On Tuesday, Vegetable Products shares hit the upper circuit of 5% to reach ₹21.17 on the BSE. The stock climbed 4.96% in opening trade amid a surge in volume trade as 2,085 shares changed hands as compared to two-week average volume of 3,000 shares. Driven by the sustained rally, the stock hit a 52-week high of ₹21.17 today. The company’s shares had hit their 52-week low of ₹1.9 on December 29, 2020.
The stock was trading higher than 5-day, 20-day, 50-day, 100-day and 200-day moving averages, according to stock research platform Markets Mojo. The stock witnessed a drop in investor participation, with delivery volume falling by 98.5% against 5-day average delivery volume.
As per the analyst platform, Vegetable Products turned bullish from mildly bullish on November 25, 2021, at ₹5.28. The stock was trading risky with a negative book value, which means the company has more total liabilities than its total assets.