Modipon Ltd

The stock price of Modicon yesterday hit a new high at Rs.25.20 and it even closed the day in the green. This, for a company which has permanently discontinued its manufacturing activities from May 2007 and disposed off all its movable assets by 2009 comes as a real shocker. What was the stock price celebrating?

The company declared its results yesterday. It has no manufacturing, so no sales. But it sold off its factory and residential quarters and that earned it a profit, shown as exceptional income at Rs.2.72 crore. This helped the company end the quarter with actually a net profit of Rs.30 lakh! The same thing was seen in Q4, where exceptional income helped it end with a net profit of Rs.1 crore.

The company is in dire straits and it is indeed a shock to see such companies, with no manufacturing activity but continuing to not only trade but hitting new highs. It owes money to PNB and in 2014 had negotiated for a one time settlement (OTS) of Rs.17 crore to be paid in four quarterly instalment in FY15. The company paid only Rs.6 crore and then PNB extended the OTS payment of Rs.13 crore to be paid before FY16. It paid Rs.12 core and balance 1 crore remains to be paid. It never paid the interest due, neither in Q1nor in current Q2. If this had been paid, even the exceptional income could have prevented the loss. ­­­