Why is Setubandhan Inf. falling/rising?

Persistent Downtrend Against Market Benchmarks

Setubandhan Infrastructure’s recent price movement is part of a broader downward trajectory that has persisted over multiple time frames. Over the past week, the stock has declined by 9.62%, significantly underperforming the Sensex, which was nearly flat with a marginal loss of 0.21%. The one-month performance further emphasises this trend, with the stock falling 11.32% while the Sensex gained 0.64%. Year-to-date, the divergence is even starker: Setubandhan Infrastructure has lost 39.74% of its value, whereas the Sensex has risen by 9.79%. This underperformance extends to longer horizons, with the stock down 41.98% over the last year and 74.59% over three years, contrasting sharply with the Sensex’s gains of 8.58% and 40.44% respectively.

Technical Indicators and Trading Patterns Signal Weakness

From a technical perspective, the stock is trading near its 52-week low, just 2.13% above the lowest price of ₹0.46. It has consistently traded below all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, signalling sustained bearish momentum. Additionally, the stock has exhibited erratic trading behaviour, having missed trading on one day in the last 20 sessions, which may indicate low liquidity or investor hesitation. Investor participation has also waned considerably; delivery volumes on 21 November were recorded at 1.13 thousand shares, a sharp decline of 91.18% compared to the five-day average delivery volume. This drop in participation suggests diminishing confidence among shareholders and traders alike.

Fundamental Challenges Weighing on Investor Sentiment

Setubandhan Infrastructure’s fundamental profile remains weak, which is a key factor behind the stock’s decline. The company has not declared financial results in the last six months, creating uncertainty around its current operational and financial health. Its ability to service debt is limited, as indicated by a high Debt to EBITDA ratio of -1.00 times, reflecting negative earnings before interest, taxes, depreciation, and amortisation. This ratio suggests the company is struggling to generate sufficient earnings to cover its debt obligations.

Profitability metrics are equally concerning. The average Return on Equity (ROE) stands at a mere 0.07%, signalling minimal returns generated on shareholders’ funds. The latest quarterly results for March 2023 reveal a pre-tax loss of ₹12.62 million, a decline of 133.04% compared to the previous period, and a net loss of ₹10.88 million, down 112.52%. Furthermore, the inventory turnover ratio for the half-year period is notably low at 1.11, indicating inefficiencies in managing stock levels and potential liquidity constraints.

Risk Factors and Market Valuation

The stock is considered risky relative to its historical valuations, with a significant negative return of 41.98% over the past year despite reported profit growth of 101%. This disconnect between profit growth and share price performance may reflect concerns about the sustainability of earnings or broader market scepticism about the company’s prospects. The stock’s liquidity, while sufficient for certain trade sizes, remains limited, which can exacerbate price volatility and deter larger institutional investors.

Conclusion: Why Setubandhan Infrastructure Shares Are Falling

The decline in Setubandhan Infrastructure Ltd’s share price on 24 November is the result of a combination of weak financial fundamentals, poor recent earnings performance, and negative technical indicators. The company’s failure to release results for over six months, coupled with significant losses and low profitability ratios, has eroded investor confidence. This is compounded by the stock’s persistent underperformance relative to the Sensex and its sector, as well as falling trading volumes and liquidity concerns. Together, these factors have contributed to the stock trading near its 52-week low and experiencing a sharp price decline, signalling a challenging environment for shareholders and potential investors.

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