Alok Industries had a problem that most shareholders never want to see on a balance sheet.
By March 2019, the textile company had a negative net worth of ₹12,922 crore. Its liabilities had grown far beyond its assets, and lenders were owed roughly ₹30,000 crore. The company was deep into insolvency proceedings that had started in 2017.
Yet within a year of its resolution, Alok Industries became one of the market’s most dramatic recovery stocks.
The share price, which had been trading at only a few rupees before the restructuring, eventually surged into the ₹30s in 2020. At one point, the stock had gained several hundred percent in a matter of weeks.
The interesting question is not simply why the stock rose. It is how a company…