Penny Stocks that hit Rs 0 in 2024

Welcome to today's edition of stocks made easy.

Regular readers of this column turn to us for ideas and investment insights.

In case you missed it:

• Precision Engineering Stocks: The New Game in Town
• Vishal Mega Mart vs Dmart vs V-Mart Retail
• Smallcaps Powering Construction Revolution

Yesterday, we looked at the top performing penny stocks of 2024 that rallied over 1,700%.

Today, let's flip the script and explore the other side of the spectrum - the penny stocks that crashed and burned, delivering the worst performances of 2024.

Here are the penny stocks that hit Rs 0 in 2024.

Since there's no set definition of penny stocks in India, a stock that's trading at a 2-digit price can be considered a penny stock. In other words, a stock that is trading less than Rs 100.

#1 Rajnish Wellness (down 85%)

At the top of the list, we have Rajnish Wellness.

Rajnish Wellness is a wellness and pharma company engaged in manufacturing and marketing of various ayurvedic and ethical personal and healthcare products and supplements.

When we talk about the biggest wealth destroying stocks of recent time, Rajnish Wellness is one popular name that pops up.

From its stardom to the fallout (the promoter was involved in a sex scandal), shares of the company have been under pressure.

In the past one year, Rajnish Wellness share price is down 85%.

Shares of the company started the year 2024 at Rs 10 and currently trade at Rs 1.5.

The company claims to be the only listed company in the sexual wellness space.

Its major focus area goes towards energy revitalisation products and personal care products.

The flagship brand of the company is "PlayWin" is one of the fastest growing brands in the sexual wellness category, contributing most to company's revenues.

Due to lack of latest information and the company not filing any earnings presentation, we can't gauge what the immediate future looks like.

Although it has posted steady earnings in the past 5 years.

Financial Snapshot

Rs m, standalone	FY20	FY21	FY22	FY23	FY24
Net Sales	137	133	264	258	767
Growth (%)	-67%	-3%	98%	-2%	197%
Operating Profit	3	5	8	7	20
OPM (%)	2%	4%	3%	3%	3%
Net Profit	-6.1	1	4	5	10
Net Margin (%)	-4%	1%	1%	2%	1%
ROE (%)	-2.8	0.5	1.8	0.9	1.2
ROCE (%)	1.0	1.4	2.7	1.1	2.2
Dividend (Rs)	0.0	0.0	0.0	0.0	0.0
Debt to Equity (x)	0.4	0.4	0.4	0.1	0.1

Data Source: Equitymaster

The company is currently setting up business centres at railway stations, having received the approval from Indian Railways in 2022.

Rajnish Wellness recently raised funds to the tune of Rs 49 crores on the basis of rights issue.

So, what does the Rajnish Wellness fallout teach us? It's to always account for corporate governance when it comes to investing in stocks.

The company still continues to remain in focus for all the wrong reasons. In October 2024, Rajnish Wellness announced that a Thailand-based entity wants to buy two of its brands for Rs 10.5 billion (bn).

Whereas, at the time, the company's marketcap stood at less than Rs 2 bn.

What happened next would surprise you... on the very next day following this announcement, one of its promoters sold Rs 50 million worth of shares in the open market.

Coincidence?

#2 Future Supply Chain Solutions (down 84%)

Second on the list is Future Supply Chain Solutions.

Trading at Rs 11.4 at the start of 2024, the stock price has fallen to Rs 1.8.

That's a fall of 84%!

Future Supply Chain Solutions provides warehousing, transportation & distribution systems and logistics solutions.

The company is promoted by Future Enterprises.

The fallout of Future Supply Chain begun when most of the Future group companies started going bankrupt.

The company came close to recovery in 2019, but within a few months, the pandemic hit the world, with almost all stores shutting down across India.

The shutting down of stores and litigation led to a loss of cashflows for all Future group companies, which started defaulting on bank loans.

In January 2023, Future Supply Chain Solutions was put under the corporate insolvency resolution process as per the order passed by National Company Law Tribunal (NCLT).

At one point in time, the group founder Kishore Biyani was known as the "king of Indian retail" having built one of the largest retail empires in India with its Big Bazaar, Central, and Easyday formats.

But the group became a victim of too much debt during the financial crisis of 2008.

In 2012, the group was barely surviving by selling stakes in Pantaloon Retail to the Aditya Birla Group and divesting Future Capital, the group's financial services arm, to Warburg Pincus.

This fallout goes on to teach that one should always avoid high debt companies. If sales were to slowdown, the net profit will take a double blow because the interest payments will remain the same.

It's best to avoid penny stocks where the debt-to-equity ratio is higher than 1. Conservative investors can use an upper limit cut-off of 0.5 for the debt-to-equity ratio.

#3 Thinkink Picturez (down 81%)

Third on the list is Thinkink Picturez.

A year ago, shares of the company used to trade at Rs 9 per share. Currently, the script quotes at Rs 1.7 per share.

In the past 1 year, shares of the company have fallen 81%.

Thinkink Picturez is a film production company in the media & entertainment field.

It creates content for film making, TV and web shows, and provides services such as concept development, casting, set designing, script writing, location scouting, photography, editing, sound effects and mixing services.

So, what explains the massive fall in its performance in the year gone by?

Well, the troubles actually started back in June 2023 when the company was in the news in the matter of Eros International Media. The market regulator carried out a forensic audit of its books and accounts.

Adding to woes, the media industry has seen a sharp downfall in the past year, with Bollywood expecting a 30-40% fall overall.

The company's recent collaboration with T-Series, Balaji Telefilms, and Wakaoo Films include direction of Vicky Vidya Ka Woh Wala Video, and some upcoming projects like Ramlali, Googly, Arabi Kalyanam, Chemical India, Kanya Kumar, Ladkiwale Ladkewale, among others.

The recent performance, however, has given hope to investors. The company has posted a stark improvement in the first two quarters of FY25.

Earlier this month, the company made two notable strategic acquisitions. It invested in two prominent South Indian movie production houses - Raj Televisions (Rs 156.5 million) and Omkar Films (Rs 139.5 million).

The company's management is optimistic about the South Indian film industry, and they're planning to gradually expand footprint in the segment. Expansion into the Hollywood segment is also on the cards.

In August this year, the company split its shares and later in October 2024, it carried out a rights issue to support its expansion plans.

Earlier this month, the company's board also approved an issuance of 2 bonus shares for every 1 share held by eligible shareholders.

Further, the board also said the company will soon start paying dividends.

For more details, check out Thinkink Picturez' financial factsheet.

Which Other Penny Stocks Hit Rs 0 in 2024?

Apart from the above, here are other penny stocks that fell badly and touched low single digits.

Company	Current Price (Rs)	Marketcap (Rs m)	Fall in 2024 (%)
Sylph Technologies Ltd.	1.08	387.4	-72%
Filatex Fashions Ltd.	0.79	6,583.9	-71%
Akshar Spintex Ltd.	0.74	582.7	-69%
Standard Capital Markets Ltd.	0.98	1,695.4	-63%
Lesha Industries Ltd.	1.60	455.2	-56%
GACM Technologies Ltd.	0.76	517.2	-55%
JCT Ltd.	1.27	1,102.8	-53%
Maharashtra Corporation Ltd.	0.79	498.9	-52%
Adcon Capital Services Ltd.	1.00	198.4	-47%
KCL Infra Projects Ltd.	1.55	261.8	-45%
Shree Ganesh Bio-Tech (India) Ltd.	1.03	410.6	-43%
Gold Line International Finvest Ltd.	0.61	317.8	-40%
BLS Infotech Ltd.	1.70	744.1	-35%
Alstone Textiles (India) Ltd.	0.76	4,768.8	-34%
Vinny Overseas Ltd.	1.80	837.4	-33%
GG Engineering Ltd.	1.51	2,392.6	-31%
Kome-On Communication Ltd.	1.59	23.9	-30%
Indian Infotech & Software Ltd.	1.28	1,621.8	-30%
MPS Infotecnics Ltd.	0.34	1,283.3	-28%
Abhinav Leasing & Finance Ltd.	1.95	97.5	-28%

Data Source: Equitymaster

In Conclusion

These days, far too many investors are compromising the safety of their portfolios in their quest for extra returns.

They are making all the mistakes that lands an investor into trouble once the tide starts turning.

Mistakes like getting into highly speculative counters, putting an unusually large sum into a single or a handful of penny stocks, and not keeping enough cash on hand just in case things take a turn for the worse.

In conclusion, the next time you invest in a penny stock or low liquid counter, check whether the company has a strong balance sheet. A healthy financial profile indicates good growth prospects.

Next, check for future growth opportunities. Favourable government policies or good order book status are some indicators you can look at.

Finally, check for feasibility of business. The more viable the business, the longer it will last.

Here's what Co-head of Research at Equitymaster, Rahul Shah has to say on the penny stocks to avoid.

• Graham once mentioned that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.
  
  A lot of poor quality penny stocks can have one or two years where they earn good profits.
  
  Investors should not confuse this prosperity with safety and end up buying the stocks.
  
  They should always stick with stocks that have at least a 5-year track record of stable or growing profits or both and also a strong balance sheet. Otherwise, the risk of losing money in the penny stock space is very high.

That's it for today.

Since you're interested in penny stocks, check out Equitymaster's Stock Screener to find the best penny stocks. It has a separate section for penny stocks, and it allows you to screen stocks based on your own criteria.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...