The Hindu Business Line : Navin Fluorine: Partly-paid dearer than fully-paid shares

SOME stock market players seem to defy the basic logic of investment in the current bull-run. This is seen from the stock price movements of Navin Fluorine International's fully paid and partly-paid shares.

In the last two trading sessions, the stock price of the company's partly-paid share has closed above the fully paid-up share. In today's trading, partly-paid share closed at Rs 400 on the BSE, while the fully paid share closed at Rs 389.65 for Rs 10 face value share.

Trading in two separate securities is due to the right's issue by the company in August-September last year at Rs 60 per share. As per the terms of the payment, domestic investors had to pay Rs 30 (Rs 5 face value and Rs 25 premium) and Rs 30 in the next 12 months. Till now, the company has not made the call for the remaining amount.

"It is surprising that fully paid stock is trading cheaper than partly paid shares where a sum of Rs 30 is yet to be paid and there is a price differential of Rs 11, effectively the stock is about three per cent cheaper. The only reason for this anomaly is the circuit filter on the exchange where fully paid share has five per cent band and partly paid has a 10 per cent band," said Arun Kejriwal of KRIS Research.

In a circuit limit, price of a stock cannot move beyond the prescribed limit. In upper circuit situation, there are only buyers and no sellers or vice-versa.

An analyst with a domestic broking firm, who tracks the company, said the market has gone crazy by paying a higher price of partly paid shares.

While a dealer with another domestic broking firm said, investors who don't get the fully paid shares (due to upper circuit) they purchase partly paid shares. For instance, in today's trading, fully paid share was locked in five per cent upper circuit, while one could have bought shares of partly paid shares, as there was no upper circuit. Due to different circuit limits, fully paid shares have gained 23 per cent in the last week, while partly paid shares has gained 51 per cent.

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