This PSU stock is down 10% for 2nd day after 51% rally in preceding 4 days

Shares of State Trading Corporation of India (STC India) were locked in the 10 per cent lower circuit on BSE for a second day at Rs 135.15 on Thursday amid reports that the company may be closed down by the government. 

A combined 1.45 million equity shares, representing 24 per cent of total equity of STC India, had changed hands on the NSE and BSE. There were pending sell orders for around 60,000 shares, exchanges data shows.

In the past two days, the stock of the public sector undertaking (PSU) company has declined 19 per cent.

It tanked 24 per cent from its 52-week high level of Rs 177.65 touched on Tuesday, October 17, 2023. In the four days prior to this, the stock had zoomed 51 per cent from Rs 117.40 on October 11.

In last three months, the market price of the company has nearly doubled or surged 96 per cent.

According to media reports, the centre may decide the fate of three government-owned firms on Monday, October 23 in a high-level meeting to be chaired by Commerce Minister Piyush Goyal.

According to CNBC-TV18, Goyal is likely to take a call on the closure of the Metals and Minerals Trading Corporation of India (MMTC), STC and the Project & Equipment Corporation (PEC).

STC India has been engaged in the trading business and import-export of bulk commodities of rice, wheat, sugar, pulses, edible oils, fertilisers, coal, bullion etc on behalf of government and private entities.

As on September 30, 2023, the centre held 90 per cent stake in STC India. The remaining 10 per cent public shareholding are with the retail investors (8.24 per cent), bodies corporate (0.90 per cent) and insurance companies (0.63 per cent), data shows.

During the year 2022-23 (FY23), no business activities were undertaken by the company and STC continued as a ‘non-operative’ company.

However, the company continued monitoring of counter trade obligation as per directions of the Department of Commerce.

During FY23, the company reported a net profit (after tax) of Rs 37.11 crore as against the net loss (after tax) of Rs 93.97 crore reported in FY22. This was mainly due to enhanced rental income (from Rs 65 crore to Rs 73 crore) and reduction in establishment cost (from Rs 41 crore to Rs 35 crore) in view of overall reduction in manpower.

However, there was no trading income due to stoppage of business activities, STC India said in its FY23 annual report.

STC India further said the company was exempted from signing of MoU for the year 2022-23. The company is continuing on a 'non-going' concern basis and no business activities are being carried out in pursuance of direction of the Administrative Ministry/Board.

Also, the company continued to pass through difficult financial phases and accounts of STC continued to be classified as NPA by lender banks.

Since there is no change in the business activity and financial position of the company, therefore exemption from signing of Memorandum of Understanding (MoU) for the year 2023-24 has also been sought from Department of Public Enterprises (DPE) through DOC.