This stock drops 40% in one-week; should you buy?

Like many growth-driven technology stocks, Dhani Services has taken a beating over the past one week. Shares are down 80% from its 52-week high levels of ₹378 in March last year and have fallen over 40% last week.

Shares of Dhani Services, earlier known as Indiabulls Ventures, had been continuously hitting lower circuit levels for the past few trading sessions amid stake sale by foreign portfolio investors (FPIs) and negative developments.

The BSE on Thursday sought a clarification from the company with reference to news that appeared on a website quoting "Hundreds fall victim to PAN identity theft on Dhani App". The company is yet to issue a statement in this regard.

In a separate development, exchange data showed that foreign portfolio investors (FPIs) sold shares of the company via the open market. On February 22, 2022, Baillie Gifford Pacific Fund, a sub fund of Baillie Gifford Overseas Growth Funds ICVC, sold 9.43 million equity shares or 1.55% of stake in Dhani Services, at a price of ₹85.07 on the NSE, bulk deal data showed.

As per the shareholding pattern available on the BSE, the promoter groups owned 30.05% stake in Dhani Services, foreign portfolio investors (FPIs) held 27.16% shares, and retail investors’ shareholding stood at 28.1% at the end of December quarter of 2021.

The stock has fallen nearly 80% in the past one year, and 60% over the past six months. It has dropped 54% since the beginning of the year and 43% in one month. On Monday, the stock rose over 2% in opening deals after hitting 10% upper circuit on the BSE in the previous session. The stock traded lower than 5-day, 20-day, 50-day, 100-day, and 200-day moving averages. The market capitalisation of the stock stood at ₹4,453 crore.

The smallcap stock has been placed under short-term additional surveillance measure (ASM) stage one framework on the BSE due to high volatility in the share price. The pre-emptive surveillance measure has been imposed to safeguard interest of investors.

The stock fall can be attributed to dismal financial performance. For the second quarter ended September 30, 2021, Dhani Services posted a loss of ₹208.24 crore as against net profit of ₹3.80 crore in the year ago period. Total income fell 16.5% to ₹333.53 crore as compared to ₹399.47 crore during the period ended September 30, 2020.

For the first half of the current fiscal, it reported a loss of ₹400 crore as against net profit of ₹15.78 crore for the 6 month-period ended September 30, 2020. Total income dipped nearly 17% to ₹641.23 crore as compared to ₹ 789.57 crore in the same period last year.

Dhani Services is a financial services company that provides digital healthcare and digital transactional finance to its customers.