FINANCIAL STABILITY AND PERFORMANCE ANALYSIS OF MANUFACTURING AND NON-MANUFACTURING INDIAN PENNY STOCKS

Abstract

Penny stocks are low-priced stocks that typically trade for less than Rs. 10 per share, and they often represent small companies with limited resources and market capitalization. Due to their low price and high volatility, investing in penny stocks can be risky and speculative while penny stocks can offer opportunities for significant gains, they come with higher risks. It's crucial to assess the financial stability and performance of penny stocks carefully and incorporate them into a well-balanced and diversified investment portfolio. In view of this, the current study was conducted to assess the financial stability and performance of penny stocks listed on the NSE and BSE, using financial performance ratio and Altman Z Score model. For this 34 penny stocks have been selected, of which 17 are manufacturing firms and 17 are non-manufacturing firms, financial data is collected from 2017 to 2021, and using the predictive bankruptcy model of Altman, it is discovered that two firms are in the distress zone and five entities are in the grey zone among the non-manufacturing firms, and two firms are in the grey zone among the manufacturing firms. 59% of penny stocks are priced between Rs. 1 and Rs. 5. And 24% of them are between Rs. 0.1 and Rs. 1. When the financial ratios are compared, it is discovered that non-manufacturing penny stock firms have better current ratios, quick ratios, debt-equity ratios, and ROE than manufacturing firms. Finally, a significant difference in financial stability and performance is discovered between manufacturing and non-manufacturing penny stock firms.