Reliance Industrial Infrastructure Limited ( R I I L )

Investing in a Multi-bagger could be the dream of many stock market investors. Multibagger simply means your investment grows by many folds : for instance if you buy a stock at Rs.100 and it grows to Rs.1000 then it is a Ten Bagger. But a genuine multibagger would not crash back to Rs.100.

Usually Large companies (like SBI or ONGC) cannot become multibaggers. Hence potential multibaggers are many in Mid-cap and Small-cap companies. Though there is high risk in these segments investors would be very happy if they get a multibagger.

Taking this weakness as an opportunity, many ‘operators’ rig up stock prices. As a result after the ‘operation is over, the stock prices crash to the previous price. To summarize it, the stock is back to square one.

For instance : Take the Case of Mukesh Ambani Group held Reliance Industrial Infrastructure Ltd (RIIL). The Highlights of this company are:

• Total Number of shares issued are : 1.51 Crore shares
• Reliance Industries holds 45% of the shares ( 68 Lakh shares )
• Institutions hold 11.36% (17 Lakh shares )
• FII’s hold 1.97% ( 3 Lakh shares )
• Public hold 41% ( 62 lakh shares )
• The Share Price as on 1st Aug 05 was Rs.175 with a total volume of 23252 shares
• On 31-Oct-07, the share price was Rs.3202 ( believe us) as a high volume of 254830 shares
• On 9-Mar-09, the stock fell to as low as Rs.235 (Back to square one).
• And on 6th April 09, the share price shot up to 325, on 8th April to Rs.612 and on 9th April to Rs.819 at a whooping volume of 49,97,696 shares !
• Above all, the total percentage of stocks bought for delivery indicates the genuine investors are interested in the stock. As far as RIIL is concerned, only 4.15% of the total traded shares is on Delivery. All others are ...

Anyone who picked the stock at Rs.325 on 6th April would no doubt have minted money. It multiplied by two and a half times in three days ( 250% !!!). But imagine the fate of those investors who picked this stock at an all time high of 3200. Don't be Greedy. Stay cautious with such stocks.

Our advise in this situation is:

• Better avoid such stocks
• These stocks do not move with fundamentals. ( Its book value as on March 2008 is Rs.86 and its EPS is Rs.14.43. Hence its PE at Rs.819 works out to 56.75)· In other words if you buy this stock at Rs.819, it would take 57 years to get back your capital by way of EPS.
• If at all you picked this stock, then better realize what ever profits you make and be sure not to remain invested. Otherwise you will get caught.
• Do read the annexing article for your kind information and knowledge.