Penny Stock Below Rs 2 Hits 10% Upper Circuit; Reasons Behind The Bull Charge?

One of Dalal Street's multibagger stocks, Standard Capital Markets Ltd., has grown investors' wealth eight times in only a single year. On Friday, the shares of Standard Capital Markets were locked in a 10% upper circuit limit at Rs 1.52 per share level. The NBFC penny stock has risen by Rs 0.16 to the current market price logging in a gain of 850.00% in 1 year. The following are the reasons for the penny stock's recent surge in value.

As of June 2024, the company's shareholding pattern shows that promoters hold a 14.86% stake, while the public owns the remaining 85.13%. SCML is preparing for a 2:1 bonus share and a stock split from Rs 10 to Rs 1, set to take place on the ex-date, December 29, 2023, which is expected to improve liquidity and attract retail investors.

In August 2024, SCML's board of directors approved a plan to raise Rs 264 crore via Non-Convertible Debentures (NCDs) through a private placement. Each NCD is priced at Rs 10,00,000, and the total allotment consists of 2,648 unrated, unlisted, secured NCDs. This move to raise capital reflects the company's focus on strengthening its financial position and supporting growth initiatives. The Rs 264.8 crore raised through NCDs will be used for business expansion and financial restructuring.

Additionally, SCML announced the creation of a new wholly-owned subsidiary, Standard Insurance Broking Limited, aimed at expanding its offerings in the insurance sector. This diversification aligns with the company's long-term strategy of providing a comprehensive range of financial services.

On August 14, 2024, SCML reported its Q1 FY25 results, revealing a 52.63% year-over-year (YoY) increase in revenue. Although the company's operating income decreased by 15.62% quarter-over-quarter (QoQ), it showed a significant 34.95% growth compared to the same quarter the previous year. These results suggest that SCML is managing short-term challenges while improving its core operational efficiency. Earnings per share (EPS) for the quarter stood at Rs 0.01, reflecting the company's steady performance despite volatile market conditions.

In June 2024, SCML's board approved the allotment of 26 crore equity shares with a face value of Re 1 each. These shares were issued at Rs 2.75 per share, converting an outstanding secured loan amounting to Rs 71.50 crore into equity. Following this conversion, the company's paid-up equity share capital increased to Rs 173 crore. The move to convert debt into equity strengthens SCML's balance sheet and positions it well for future growth opportunities.

Founded in 1987, Standard Capital Markets Ltd is a non-banking financial company (NBFC) registered with the Reserve Bank of India (RBI). The company offers a wide range of financial services, including advisory for negotiations and project identification, arbitration and mediation, due diligence, litigation assistance, and licensing services such as company incorporation and import/export licenses.

In a bid to further enhance its service portfolio, SCML has established a wholly-owned subsidiary, Standard Capital Advisors Limited, focused on merchant banking activities. This expansion into merchant banking is expected to bolster the company's reputation as a comprehensive financial service provider in the NBFC sector.