Why PC Jeweller stock fell over 28% in trade today

The PC Jeweller stock tanked in early morning trade after the firm said it was withdrawing an offer related to buyback of equity shares. The stock crashed over 28% to 86.10 compared to the previous close of 119.95 points. At 9:45 am, the stock was trading 19.55% or 23.45 points lower to 96.50 on the BSE.

The stock closed 25.89% or 31 points lower at  88.90 level on the BSE.

The firm in an intimation to bourses said, "This is with reference to our earlier intimation dated May 10, 2018 regarding Board Approval for Buyback of Equity Shares. However, in view of the non-receipt of the requisite NOC from the Company's Bankers, the Board of Directors at its meeting held today has decided to withdraw the aforesaid Buyback Offer with immediate effect."

On May 10, 2018, the PC Jeweller board announced a share buyback worth Rs 424 crore, at a price of Rs 350 per unit, 67 percent higher than the closing price of Rs 209 on previous day.

The stock gained 18% higher in early trade on the news of share buyback on May 11. It hit an intra day high of  247 in trade.

The promoters and the promoters group would not participate in the buyback of shares.

The stock is down 62% during the last one year and 79% since the beginning of this year.  

It has been losing for the last five days and is down 27% during the period.

The stock has seen volatile phases this year.

Sale by FMR LLC

On May 3, the stock hit its 52-week low of 95.05 after falling 14% intra day. The stock fell to new yearly lows amid news that FMR LLC, a fund managed by Fidelity International on April 30, sold over 1.3 crore shares of PC Jeweller through open market transaction.

Before the disposal, Fidelity managed funds had 2.77 crore shares in the company equivalent to 7.04 per cent stake. The company said FMR LLC sold nearly 47 lakh shares of PC Jeweller through open market transaction taking the two day stake sale to nearly 1.77 crore shares.

Before the share sale, the stock was hit by two issues.

Speculation hits stock

First, there was speculation that the company's promoters might have held back information on a business relationship with e-governance service provider Vakrangee, a company, which according to reports came under Sebi's scanner for alleged price and volume manipulations of its own stock on BSE and NSE. However, Vakrangee on February 3 clarified that rumours of involvement of company in price and volume manipulation were completely baseless and factually incorrect.

On January 25, 2018, Vakrangee bought 20 lakh shares of PC Jeweller at Rs 561.71 on NSE.

Stake sale by promoter

Secondly, according to reports, PC Jewellers promoter Padam Chand Gupta gifted some his stake to family members via off -market transactions. Even as the firm has said it would make requisite disclosures in this regard from time to time, there are fears about more such deals taking place in the future.

PC Jeweller is engaged in the business of manufacture, retail and export of jewellery. The firm offers a range of products including 100% hallmarked gold jewellery, certified diamond jewellery and other jewellery, including silver articles, with a focus on diamond jewellery and jewellery for weddings. Established in 2005, PC Jeweller is the second-largest listed jewellery retailer in India.

Written by Aseem Thapliyal