If 2017 was a dream year for Prakash Industries, 2018 has turned out to be a nightmare. The stock, which was trading in the 50-55 zone in January 2017 gave a stellar run to the investor and touched an all-time high of 271 giving 500% return in a span of 13 months. The management was hopeful, promised to double their production capacity in the next quarters and traders were hoping for another stellar year. And why not, it was backed by heavyweights like the Big Bull RJ himself.
But since touching it’s all time high zone, the counter started to tumble and panic filled the heart of hopeful investors. Despite seeing a 184% increase in its profit in Q1 and net sales of Q2 being up by almost 50%, its share kept on tumbling. The company got under SEBI scanner for being a shell company, which it clearly came out of. But the company got involved in an alleged coal scam in July 2018, and Enforcement Directorate (ED) filed a charge sheet in Delhi High court, where Prakash was mentioned along with 6 other companies.
Recently, a news surfaced that ED has attached property of Prakash Industries, in coal allocation scam. As mentioned in the reports of the central agency, Prakash has filed a false declaration to BSE, about acquiring the coal block without actually possessing it. The action was taken under the ambit of Prevention of Money laundering Act(PMLA). The company came out quickly in defense and denied receiving orders for any such action. This could not prevent the shares from sliding down 2% on Thursday.
However, the management alone can not be blamed. Prakash has shared the same fate, as the NIFTY Metal. Amidst raging trade war and high fuel prices, coupled with geopolitical uncertainty, the index has slid more than 30% since January 2018. Heavyweights, such as Hindalco, Jindal Steel, and Vedanta have suffered heavily sliding between 30-45%.
Although it has a sound business, Prakash has a history of poor management. The stock is available at an year low of 83 rs but investors are advised to make calculated decisions on the counter until the case related to coal scams is not cleared.
STOCK NAME : Prakash Industry
52 WK OW/HIGH: 81.20 / 276
SUPPORT 1: 76 (Daily / weekly)
SUPPORT 2: 62.5 (Monthly – 104 support already broken)