Despite the bleak economy and rising concerns of the new variant of COVID-19, penny stocks continue performing well in the domestic equity markets. Shares of the textile company Digjam have topped the list of penny stocks with a rise of 5,935% in 2021.
As of 1:32 PM 31 December 2021, it was trading at Rs. 245.35 with a market cap of Rs. 490 crores on the NSE. In the past ten weeks, its market price appreciated by around 1,138% or 13 times from its previous price of Rs. 17.27.
Now, let us take a deeper dive into the company and its stock.ty
About the Company – Digjam Ltd.
Incorporated in 2015 as Digjam Textiles Limited, this company as a textile manufacturer is primarily known for its suiting fabrics. It is a well-known player in the clothing and fashion industry with a reputation for making fabrics with high-end finish and quality.
The company has a large manufacturing facility in Jamnagar in an area of 47 acres. Equipped with advanced machinery imported from Germany, France, Italy and Switzerland, Digjam has a fully vertically integrated plant that carries all fabric-related processes.
It carries out different processes like spinning, weaving, dyeing and finishing to convert wool tops to finished fabrics. The company manufactures over 3,000 design-shade combinations every year for polyester wool, light wool and woollen fabrics.
Digjam’s product quality is up to global standards, and many international brands use it. A majority of its products get exported to the United States, Europe, the Middle East and Far East. Since 2008, the company has a partnership with Holland & Sherry, a Scotland-based premium fabric maker.
Rising Popularity of Penny Stocks in India
The Indian stock market has witnessed a stellar rally in 2021 despite the hurdles of COVID-19. This bull market attracted many investors to penny stocks, leading to many of them delivering multi-bagger returns. Moreover, many of these stocks would generate impressive returns for the shareholders.
Penny stocks have no standard definition. Generally, stocks priced in single digits or below Rs. 10 are included as penny stocks. Over 30 such stocks have delivered returns of over 1,000% in 2021, while 90% of them surged over 500%.
Shares of Digjam have benefitted from the record-breaking rally in 2021. Its shares were locked in the upper circuit for the eighth straight trading day as of 29 December 2021. Since its relisting on 18 October 2021, its stocks were frozen in the upper circuit of 5% for 49 days on the BSE.
Share Price History of Digjam
Over the last three years, this stock has surged from Rs. 0.97 to Rs. 194, a rise of nearly 19,900%. In the previous year, it registered a growth of 4800%
Over the past three months, Digjam’s stocks surged 1,000% from Rs. 17.27 to Rs. 194. It logged a 90% increase for a month, rising from Rs. 66.60 to Rs. 194 as of 22 December 2021.
The stock of Digjam is included in ASM’s second stage on the BSE. These stocks witness sudden and huge illogical price fluctuations. Its shortlisting in this category depends on these parameters:
- Number of hits of price band
- P/E ratio
- Variation of price between closings
- High low price variation
- Client concentration
From the share price history, an investment of Rs. 1 lakh in Digjam on 27 December 2018 would be worth Rs. 2 crores after three years. An investment of the same amount on 31 December 2020 would be worth Rs. 59.35 lakhs after a year. Similarly, the same investment made on 27 November 2021 would be worth Rs. 1.9 lakhs in just a month.
The company’s strengths include competitive advantage in the sector, favourable government policies, and robust demand. It has the necessary skills and expertise to continue delivering strong performance.
However, experts always recommend extra caution when investing in these penny stocks as their valuations are extremely high. A bullish market has encouraged a surge in these stocks, but inexperienced investors would not be able to make an exit.
Frequently Asked Questions
- What are the problems with investing in penny stocks?
Penny stocks often have extremely high valuations and are prone to lower circuits when they fail. They are also frequently not backed up by strong fundamentals. As such, their valuations degrade considerably when the bull run of the current market ends.
- Did Digjam Limited deliver profits in 2021?
Yes, Digjam has delivered a strong financial performance in 2021. Its net profit in the September quarter was Rs. 7.46 crores, an increase of 370.29% against a loss of Rs. 2.76 crores in the previous year.
- Do the promoters of this company hold any stake?
No, Digjam’s promoters do not hold any stake at the end of the September quarter.