Did you know that there is a company with zero profits, zero sales and yet has a market capitalisation greater than Motilal Oswal, a well-known financial services firm listed on the stock exchanges? This company is Parag Shilpa Investments.

In one year the stock has moved up nearly 4,700 percent. A penny stock, which was for Rs 5, is now trading around Rs 250 or so.The classic case in this is of course the same trades what we are mentioning in all the companies. Parag Shilpa has a market capitalisation of nearly Rs 1,280 crore higher than Motilal Oswal. If you cannot find the scrip with BSE, the scrip code is 505502.

The businesses what the company is operating in are classic businesses. They are the financers, they are brokers to finance export and imports. They are the promoters, contractors, agents in the business of construction and building.If you go back and see the financials which are available on BSE website, you will see that since 1999, till 2012 there are no sales and there is no profit after tax (PAT).

The only difference comes after 2012 only because of a scheme of arrangement, which is there. So you will see in 2013, there was a profit of 4 lakh only.As stated earlier, there was a scheme of arrangement between the company and the two other companies, which were Crescent Digital Technologies and Swift IT Infrastructure. The reason was simple. The promoter holding changed since March 2012 and that was why you saw it coming in. But there were no financials to go with it.

Just a classic case of the promoter holding and you will see that in March 2012 the promoter holding was 78.9 percent. One year later, the promoter holding came down to as low as 0.2 percent. Then went up right now if you just go there, it is 19.7 percent. It was from March or January when the promoter holding changed, you saw the spike happening in the stock as well.

The other important fact is that if you just see the other shareholders apart from this 20 percent promoter who hold this company, there are only 1,822 shareholders who own the rest 80 percent company and out of them it is only 675 shareholders who own 70 percent.So put everything together, the entire company which is worth nearly Rs 1,500 crore, is held by one promoter which has been changing hands and only 1,800 individuals.

Q: Do we know if the promoter is changed or is it just that the promoter company names may have changed but behind that veil the promoter groups or the entity has remained the same?

A: I checked the names clearly but the names keep on changing. From 80 percent it came to nil and from nil it went to 20 percent. So the names were changing of course in those promoter shareholding. There was no business, nothing to go by with the financials and the stock has been moving up. Even today it was up in the market.

Q: Any idea on whether there are any institutional shareholders in this stock or any way to find out what exactly has driven this stock price up outside of that merger scheme that you alluded to and the change in promoter?

A: Most of the market veterans will tell us about the reasons behind these kind of shell companies which are in the market. There is no institution, there is no fundamentals, there is nothing in this company which will substantiate the fact to take it above Motilal Oswal, which are operating in the markets since the long time.Clearly people say that these are classic cases.

We don’t know whether this is here in this company or not but there are shell companies which are operated only because of the short-term capital gains (STCGs) and long-term capital gains (LTCGs) which is done in the market.

Q: Short-term and long-term capital gains tax play that is playing out in stocks like this, we don’t know if it is specific to this stock?

A: The clear reason why we point these companies is that these market capitalizations that are shown for these companies are not at all related anywhere to -- if you see the shareholding pattern, the financials, the way the companies are operating, the way the businesses are, the emails that they have, the websites they have, so they are not at all related to it. There could be many reasons as you pointed one of them could be there but this is surprising.