InvestorQ : I have some old shares in my portfolio like Bajaj Hindustan, JP Power, Jaypee Infra, Rel Power, Unitech. Valuation of all of it is very low and that is the reason I kept them for so long. Appreciate a guidance on whether to sell or wait how long?
Sachin K made post

I have some old shares in my portfolio like Bajaj Hindustan, JP Power, Jaypee Infra, Rel Power, Unitech. Valuation of all of it is very low and that is the reason I kept them for so long. Appreciate a guidance on whether to sell or wait how long?

Answer
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ramya Bhaskaran answered.
1 year ago


Not sure what is your purchasing price of all these stocks but can be pretty certain that you must be sitting on losses on all these stocks. To my understanding, most of these stocks have lost more than 90% of their value and that is normally indicative of larger structural issues in these companies. Let me quickly run you through each of these.

Bajaj Hindustan – A sugar company that has been making losses in most of the quarters. Sugar industry itself is under strain due to excess supply on the back of consistently higher sugar output. Most sugar companies have huge outstanding amounts payable to farmers and the sugar industry owes nearly Rs.22,000 crore dues to sugar cane farmers. Already a penny stock and output are neutral at best.

JP Power – It is part of the Gaur group and has sold most of its productive power assets to the Birla group. There is nothing much left in the company, which shows why the company is quoting at around Rs.2.

Jaypee Infra – is also part of the Gaur group and is facing legal battles for housing projects undertaken but not completed due to the shortage of funds. The JP group at one time had a total debt of Rs.75,000 crore, which has been reduced through assets sales. No point in buying or holding to the stock.

Reliance Power – The Company announced a net loss of RS.3500 crore in the March quarter and is under corporate governance questions for not making these impairment provisions earlier. Stock is already at around Rs.5 and this is an all-time low. Future prospects are quite bleak.

Unitech – The stock has lost over 99% from its peak levels and not much is left of the company. With its Chairman under detention, the company has also defaulted in a big way on home construction commitments.

All the stocks mentioned above have very bleak prospects and the other than some speculative bounces you cannot really expect anything from these stocks. None of these stocks can really add much value for your portfolio. One more point you must remember here is not to buy stocks just because the price is low. Normally, the price is so low because that is what the stock is worth. Normally, these penny stocks have larger structural issues and that is why you must not jump into such stocks. The low price does not necessarily mean low valuations. As for these five stocks, other than Bajaj Hindustan, all others have structural issues and can be disposed off.