Shiny profits, shady practices? Unpacking this micro-cap's spurious 52x yearly profit surge

Picture this: A company with a net profit margin of 13 per cent, jaw-dropping ROE and ROCE of over 170 per cent each, negligible debt, and a meteoric YoY profit growth of 5,179 per cent as of FY24. Not just that, it trades at a miniscule P/E ratio of 3 times with a dividend yield of over 6 per cent! This is not the stuff of dreams. These metrics can be traced to the books of Gujarat Toolroom, a micro-cap company, engaged in trading of silver conductive ink, agricultural commodities, construction materials, fabrics and equity shares. We know the seemingly magical financials appear enticing enough. But unfortunately, here's a shocker for you: The company barely made any money until FY23. Which is why the gigantic rise in its FY24 net profit was only due to base effect. Gujarat Toolroom went from generating around Rs 1 crore of revenue in FY23 to Rs 550 crore in FY24, which makes its sudden rise as dramatic as dubious. We set out to unravel this too-good-to-be-true narrative. Our assessment revealed that the account of its business operations is spurious and offers no transparency whatsoever. Here's why: A timeline of twists and turns January 2024: Gold rush dreams The company rolled out an extravagant plan to rake in Rs 700-1,000 crore annually from a Zambia-based unit readying to