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Bombay Oxygen Investment’s stock prices soar amidst rising demand for oxygen during Covid crisis, except it doesn’t manufacture the gas

It is said that public sentiments majorly drive the investments made in the stock markets. And in the times of the COVID-19 outbreak, there are fewer things that would sway public opinion as readily as oxygen—something in high demand during the pandemic. As a result, scores of investors have parked their money in shares of the companies that they think would address the growing demand for medical oxygen in the hope to make supernormal gains till the crisis lasts.

With the rising demand for medical oxygen reported from several parts of the country, a raft of investors invested their money in a relatively obscure company named Bombay Oxygen Investments Ltd, believing that the company is all set to register impressive profits as the requirement for oxygen intensifies during the pandemic. Consequently, the share price of the company reached an upper circuit limit Rs 24,574.85 apiece at the BSE on Monday, with the maximum permissible gain of 5 per cent due to the stock being under surveillance. Except, the company had little to do with the production of medical oxygen.

Ever since the resurgent wave of the coronavirus hit the country and the oxygen demand soared, the stocks of Bombay Oxygen Investments Ltd has seen a sharp uptick. From trading at Rs 10,000 levels around March 22, the stock has risen almost 150 per cent to Rs 24,574 levels in less than a month. The rise in the stock is particularly sharp following April 5, incidentally around the same time the scarcity of the medical oxygen in many hospitals across the country began to be reported.

Source: BSE

Market analysts believe the primary reason behind this stellar rally is the name of the organisation that has oxygen in it and which has led investors to believe that the organisation is into the business of manufacturing the medical oxygen. The name has enthused enough investors to invest their monies in the organisation, which has nothing to do with oxygen production.

Bombay Oxygen Corporation Ltd listed as NBFC on the Bombay Stock Exchange

The website of the company ‘Bombay Oxygen Corporation Limited’ says it was incorporated on October 3, 1960. However, it changed its name to ‘Bombay Investments Limited’ with effect from October 3, 2018. The website also mentioned that the company’s “primary business was manufacturing and supplying of industrial gases which have been discontinued from August 1, 2019”.

Instead, the company is now a Non-Banking Financial Company(NBFC) that “owns substantial financial investments in the form of shares, mutual funds and other financial securities, and income from such financial investments is the source of revenue of the company”. It has been certified by the RBI “for carrying on the business of Non-Banking Financial Company (NBFC) without accepting Public Deposits.”

Though many market analysts claim that the company no longer deals in oxygen, the website of the company still lists oxygen as one of the ‘products’ it deals in. The section says the company is ‘Manufacturer and Dealer of Industrial Gases’ and lists oxygen, nitrogen, argon, carbon dioxide as products.

Notwithstanding this contradictions, the BSE page described the company as an NBFC.

Earlier this month on April 8, BSE sought information from the company after there was a heightened activity in its stock price. The BSE sought a clarification stating it “wanted to ensure that investors have the latest information about the company and to inform the market so that the interest of the investors is protected”.

The company responded to this query saying “All the material information and announcement that may have bearing on the operations (or) performance of the company which includes all the necessary disclosures… have always been disclosed by the company within the stipulated time”.

“There is no pending information or announcement which may have a bearing on the price movement of the company. Therefore, the movement in the share price of the company is market-driven and the company is in no way connected with any such movement in price,” the company told the BSE in its response on April 9.

As per its latest quarterly financial results, the company reported a total income of Rs 33.79 crore and a profit of Rs 31.69 crore for the quarter ended December 31, 2020. The company now commands a market capitalisation of over Rs 368 crores. While the majority of the company shares are held by the promoters, who own more than 73 per cent, the bulk of the public shareholding is with small retail investors.

Share price nosedives by 5 per cent following the reports of the company not producing oxygen

Soon after it dawned upon the investors that the company Bombay Oxygen Corporation Ltd is not associated with the production of medical oxygen that is in huge demand during the pandemic, the share price of the company began to plummet.

Source:BSE

On Tuesday, the shares of Bombay Oxygen Corporation Ltd opened with a lower circuit, down by 5 per cent due to stock being under surveillance. The share price of the stock is currently hovering around 23,346 levels, down from 24,574 levels a day earlier. As investors realised that the company is not into the manufacturing of oxygen, a large number of them made a beeline to sell their stocks and square their positions. This resulted in the stock price touching the lower circuit, meaning there were only sellers in the market and no buyers.

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