Intriguing fall in Punjab Tractor stock

MUMBAI, FEB 15: Even as the stock markets have turned bullish and the Bombay Stock Exchange Sensex scaled new peaks, one blue-chip stock h...

MUMBAI, FEB 15: Even as the stock markets have turned bullish and the Bombay Stock Exchange Sensex scaled new peaks, one blue-chip stock has been crashing on a daily basis, raising doubts about price manipulation. Punjab Tractor Ltd PTL has hit the year8217;s low of Rs 745 on Tuesday 8211; a crash of nearly 51 per cent from Rs 1,539 in the middle of last year 8211; following continuous selling pressure.

The stock has hit the lower circuit filter 8211; when share price falls by 8 per cent, further selling is banned for the day 8211; several days in the recent past. PTL is one of the few cash-rich and highly profitable companies owned by the Punjab Government. Punjab State Industrial Development Corporation holds 26 per cent in the company.

8220;PTL stock was a star performer on stock markets till the middle of 1999. I suspect the share is being hammered down by vested interests who are keen to hand over the company to a private party at a lower price. The share price is artificially depressed so that the acquirer need not paya huge price for acquisition,8221; said a market source. This is not the first time the company is being targeted by takeover barons. Reports of a takeover by an NRI business group had ignited its share price in 1998-99. According to corporate analysts, PTL is a prime takeover target with no private promoter.

The company has been continuously making higher profits and always bettered the tractor industry8217;s general annual growth rate. 8220;It8217;s a well-managed company. Many private sector business groups are eyeing Punjab Tractor. I won8217;t be surprised if some business groups quietly acquire the shares from the market at a lower price and make an open offer to take over the company one day. It will be a low-cost takeover,8221; said a merchant banker who preferred anonymity.

However, company officials refuted speculation about the takeover of PTL. 8220;Nobody is taking over PTL. These rumours are baseless,8221; said a company official.

There is nothing which can stop an acquirer from making an open offer for PTL. Withthe share price remaining depressed, it will be cheaper for any potential acquirer to take control of the company at a throwaway price. Share prices of PTL8217;s rivals like Escorts and Mahindra amp; Mahindra have not taken a beating like PTL. While PTL underperformed the Sensex, other companies have been moving along with the market. Unlike its share price, the company has been showing a good performance. During the first nine months of the current year, PTL recorded a volume growth of 10.6 per cent at 38,370 units as against the industry growth of 8.4 per cent. The net profit jumped by 16.5 per cent to Rs 104.50 crore during the nine-month period.

Even then investors are baffled at the falling share price of PTL. 8220;It seems to be a kind of price rigging. Vested interests may be behind this price manipulation. The regulator and stock exchanges should not allow riggers to take investors for a ride. Professionally managed companies should not be allowed to be manipulated,8221; said an investor.

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Investors are worriedthat they are being taken for a ride by manipulators. 8220;Does the stock have the correct valuation? Who is manipulating in this share? Such a prolonged manipulation will affect investor interest especially when it is clear that PTL8217;s performance is not responsible for the fall in share,8221; investors said.