Penny Stock Gives 16,000% Multibagger Gain But Is It Good Buy?

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Huge gains from penny stock

Kushal Tradelink is a penny stock based in Ahmedabad. It is engaged in paper manufacture.

Kushal Tradelink has made a record by giving a magnificent gain of 16,000% since 2013.

This proves that penny stocks are capable of giving magnificent gains if they are bought at the right time.

The market capitalisation of Kushal, which stood at Rs 45 crore on 8th August 2013 rose to Rs 7231 crore as on 24th January 2017.

The reason for the sharp increase in the market capitalisation of the penny stock was because the company posted consolidated net sales of Rs 1,589 crore in 2015-16 as against Rs 433 crore in 2014-15. The net profit soared 1420% to Rs. 98.9 crore in 2015-16 compared with Rs 6.5 crore the previous year.



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Operators involved in penny stocks?

Some experts suspect that unscrupulous operators may have indulged in circular trading to push up the share price.

S P Tulsian, a leading stocks experts opined that the penny stock was being manipulated by operators and that there was nothing financially to justify the rally.

It appears that a number of high net worth individuals (HNIs) bought the penny stocks on the assurance that they would earn a minimum of 24% annual gain.

High volume of trades

Because many investors came to buy the penny stock, there were large volumes of trades. The regular volume in Kushal Tradelink was as much as 20 lakh share per day.

Bullish prospects

Sandeep Agrawal, the Chairman of the Company is bullish about the prospects of the Company. He has predicted a doubling of revenue in the fiscal year ending March 2018. Kushal intends to expand into new industries.

He stated that the Company will buy distressed assets in the hospitality, education and entertainment businesses.

Investors trapped as BSE puts restrictions

On 25th January 2017, the BSE put Kushal Trading in the trade-to-trade category for unusual trading. This has trapped investors as they are unable to exit. The stock is locked in the lower circuit of 2%.

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