Investor Issues
How not to buy shares: Lessons for retail investors from sinking stocks

We keep getting queries about stocks that have crashed, like Opto Circuits and Gitanjali Gems; or those like Mascon Global, which became illiquid and eventually stopped trading. How can you stay away from such disasters?

At Moneylife, we routinely receive emails from investors asking about small stocks that they have bought only to find them sinking. In many cases, when the price begins to tank, these investors have bought more shares to average the price down, only to find the shares hitting a new low. They then write to us asking why is this happening and whether we can help. Here are two such recent cases.

 

Case 1 – The investor bought shares of Mascon Global at Rs50 apiece. After a few days the price started falling, and as many investors do, he bought more shares to “average the price down”. The price continued to fall heavily until it sank below a rupee; that is when he stopped buying the penny stock. At this stage his investments of Rs60,000 had already lost value. Now when he wants to exit, he cannot sell the shares since Mascon Global has stopped trading on both the exchanges.

 

Mascon Global was ramped up during the dotcom boom and was presumed to be connected to one of the sons of V Krishnamurthy, former chairman of Steel Authority of India. Mr Krishnamurthy, who has had a chequered career after SAIL, was at one time very close to Rajiv Gandhi. In the year 2000, the company had issued bonus shares in the ratio of three shares for every one share. Mascon Global also made a rights issue, launched several new ventures and did a few mergers and acquisitions with US based companies. Later, it turned controversial thanks to its connection with Ketan Parekh.

 

In its yearly income statement submitted to exchanges in March 2011, Mascon Global showed a loss of Rs431.39 crore. Shares of Mascon Global last traded on 19th April 2012 at Rs0.96.

 

Case 2 – This investor bought shares of Gitanjali Gems a few months ago at Rs600. The stock made a 52-week high on 23rd April at Rs649.70. It went down to Rs550 in mid-June. From there it has crashed to Rs183, locked in the lower circuit for the past nine sessions. Even if the investor wants to exit now, he will have to wait for the price to stabilise and some trading to take place.

 

Analysts have been suggesting that investors buy Gitanjali Gems for a price target of Rs742. Even at Rs462 they were recommending a buy.

 

There are many such examples. KS Oils made a 52-week high of Rs77 in January 2010, but the same month the scrip started falling and it has plunged by 90% since. Remember, KS Oils had received investments from some large PE funds. In May 2009, Rajat Gupta-promoted, Asia-focused New Silk Route (NSR) invested around Rs135 crore through preferential equity shares. Also, Citigroup Venture Capital and Baring Private Equity Partners Asia invested Rs49 core each through subscription to convertible warrants.

 

So what happened to this company? In its yearly income statement dated September 2012, the company recorded a net loss of Rs744.21 crore, despite huge sales figures of Rs3,386.49 crore, Some of the analysts recommended KS Oils with a price target of Rs76 in September 2010. They were very positive about it in their research reports, which are freely available across the web and after that they don’t even bother to look at the falling scrip. On 5th July 2013, KS Oils closed at Rs1.48 at BSE while on NSE it got delisted since 20 June 2013.

 

Zylog systems made a 52-week high in July 2012 at Rs340 and exactly after a year in July 2013 it made a 52-week low of Rs15. The stock plunged by 95%. Similar is the case of Opto Circuits (India). While the company’s stock was over Rs200 in April last year, it suffered a freefall of 80% in the last one year. On 31st May 2013, Opto Circuits opened at Rs51 and closed at Rs31.50, fall of 38% due to weak March quarterly results. On 5th July it closed at Rs21.70. Despite all this, ICICIDirect kept rosy target prices for Opto Circuits even as the stock was on a freefall.

 

What if someone is stuck with illiquid shares?

 

      BSE and NSE provide a facility to the market participants for online trading of odd-lot securities in physical form in ‘A’, ‘B’, ‘T’ and ‘Z’ groups (more about this below) and in rights renunciations in all groups of scrip in the equity segment. Both exchanges issue a list of illiquid scrip on a quarterly based on their respective websites.

 

      The exchanges have also arranged Periodic Call Auction (PAC) for illiquid scrips. Stock exchanges identify illiquid scrips at the beginning of every quarter and move such scrips to the PAC mechanism.

 

Well, what if you have shares that are delisted? You have no hope. You can try to use some brokers and dealers who are willing to buy delisted shares. You can sell it to them at a mutually agreed price but we have not checked out this service and cannot vouch for it.

 

How can investors prevent themselves from experiencing disasters we have described above? Here is what you should do:

     Anybody can make mistakes and so whenever you buy a share, especially a mid-cap or a small-cap stock, please have a stop loss in place.

 

     Luckily, there are some preventive measures taken by exchanges for the guidance and benefit of investors. Remember, BSE has classified companies into A, B, T, Z Groups in the equity segment on certain qualitative and quantitative parameters. Companies of A and B groups have large market capitalization. All blue chip companies are part of ‘A’ Group while other companies having a lower market capitalization—mostly midcaps are part of ‘B’ Group. ‘T’ Group represents scrip which is settled on a trade-to-trade basis as a surveillance measure. The 'Z' group includes companies which have failed to comply with its listing requirements or have failed to resolve investor complaints or have not made the required arrangements with both the depositories, viz., Central Depository Services (CDSL) and National Securities Depository (NSDL) for dematerialization of their securities.

 

So, if you are serious with your money try to stay focused on A group shares. Moneylife’s associate KenSource publishes a weekly newsletter on good quality stocks. You can check it our here.

      Moneylife publishes “Unquoted” – stories of price manipulation in every issue which can help you avoid stocks are being rigged.

 

Investors can prevent themselves from investing in stocks which have higher chances of failing. They can eliminate speculative activities by proper way of research and analysis. In almost all the examples we have highlighted, experts’ advice went wrong. Some of big PE investors, FIIs, venture capitalists, mutual fund companies also made wrong decisions. So, one cannot follow them blindly. Investors cannot outsource the job of assessing the risks associated with their investments, selection of right stocks, right time to enter and exit. - Vishrut Patel

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COMMENTS

nagesh kini

4 years ago

Both Dr. Ramdas and Prakash Bhate are bang on!
There is nothing to beat your home grown gut feeling, track the right scrips, truly said 'what goes up has to come down' and the converse also is too. Adopt the safest thumb rule of only hold to invest and not speculate. Don't indulge in day-trading as it can turn into a serious addiction more particularly when you are initially tempted with large profits taking you to the seventh heaven 'as a great market expert'. Remember,the fall can be equally fast too!

nagesh kini

4 years ago

Both Dr. Ramdas and Prakash Bhate are bang on!
There is nothing to beat your home grown gut feeling, track the right scrips, truly said 'what goes up has to come down' and the converse also is too. Adopt the safest thumb rule of only hold to invest and not speculate. Don't indulge in day-trading as it can turn into a serious addiction more particularly when you are initially tempted with large profits taking you to the seventh heaven 'as a great market expert'. Remember,the fall can be equally fast too!

Dr Anantha K Ramdas

4 years ago

Mr Prakash Bhate picks a few shares to talk about the loss that he incurred. What goes up can also come down, and it is necessary to keep a track of your investments.

Like many, I have personally benefited from reading Street Beat, and also closely followed when exit points are recommended. In any case, it is individual perception as to at what point of profit he/she should withdraw from the deal. And just importantly, purchases are to be made carefully at the receommended price range.

REPLY

Prakash Bhate

In Reply to Dr Anantha K Ramdas 4 years ago

Of the 30 shares Street Beat had recommended and I had invested in, 19 have been duds – Philips Carbon Black, Esab India, SRF, Surya Pharma, GSPL, Greaves Cotton, Banswara Syntex, Birla Corp, Pratibha Industries, AVT Natural Products, Carborundum Universal, Andhra Petro, Supreme Industries, Balkrishna Industries, Sadbhav Engineering, NCL Industries, Automotive Axles, Gujarat Fluoro, Vivimed Labs. Not a few! Six are laggards – Goodyear, Wyeth, National Peroxide, Solar Industries, Tide Water and Wabco. One has just about beaten the Sensex – Venus Remedies; one is good – KPR Mill. Three are outstanding – Pidilite, Kajaria and Ajanta Pharma. It is because of these five that things have not gone totally awry.
If 25 out of 30 shares have not kept up with the Sensex and had to go the ‘Stop Loss’ way the whole analysis with which these were recommended in the first place is flawed. And if 25 out of 30 is ‘picks a few shares to talk about the loss he incurred’ then the whole meaning of the word ‘few’ needs to be changed.
During the same time I, using my own meagre investment skills, invested in 13 shares. Three turned out to be duds – SKF Bearings, Wockhardt and Bhartiya International. Four are laggards – BASF, Grasim, Indraprastha Gas and Titan. Three have just about beaten the Sensex – Asian Paints, M&M and HDFC Corp. Two are good – Marico and Eicher and one is outstanding – Lupin. Call it fluke, call it a statistical aberration, call it whatever; the performance has been significantly better than Street Beat and the bottom line is that my total investment in these shares (unlike in the 30 shares listed above) has just about beaten the Sensex. I only wish I had more confidence in my own method however half-baked it would appear to experts.
My conclusion remains unchanged – stay away from experts, don’t touch them even with a barge pole!

Dr Anantha K Ramdas

4 years ago

Mr Prakash Bhate picks a few shares to talk about the loss that he incurred. What goes up can also come down, and it is necessary to keep a track of your investments.

Like many, I have personally benefited from reading Street Beat, and also closely followed when exit points are recommended. In any case, it is individual perception as to at what point of profit he/she should withdraw from the deal. And just importantly, purchases are to be made carefully at the receommended price range.

N Balakrishnan

4 years ago

I have burnt my fingers many a times. Few e.g. IPO : Tata steel, Archid ply, Reliance Power etc. From market : Arshiya International, Educom solution, Sintex Industries, bang overseas, Unity Infra etc in addition to few mentioned in the article.

Big people easily comes out with minimum loss. We retails investors could not come out and are cursing the stock market

sachchidanand

4 years ago

Stock exchanges are known for rubbing salt into injury. They resort to delisting instead of filing criminal cases against the Directors who deliberately indulge in defaulting de-listing

nagesh kini

4 years ago

There is no expert on the share market even the great Warren Buffet or Jhunjunwalas!
Just keep watching triple AAA blue chips - TELCO and TISCO and went down and IHCL is sinking fast.
Hold them till such time as they come out with bonus and fairly good dividends.
Get rid no sooner you see red flags - Wockhdat was bad apple though considered a blue chip with clean management it went into CDR!

Prakash Bhate

4 years ago

Don't listen to 'expert' advice, including that from Moneylife's Street Beat! Surya Pharma is a classic case. Price around Rs 20 in mid 2011, now 90 paise. Other examples include Philips Carbon Black, ESAB India, SRF, Guj State Petronet, Greaves Cotton, Banswara Syntex, AVT Natural Prodcuts, Andhra Petro, Sadbhav Engg, Automotive Axles, NCL Industries, Vivimed Labs, Guj Fluorochemicals. All these shares have done worse than the Sensex. Very few of suggested scrips have done well, e.g. Ajanta Pharma, Pidilite, Kajaria Ceramics, KPR Mill. I know because I invested in these shares and lost money; fortunately not too much because of the few good performing shares. Don't touch experts, even with a barge pole. Do your own analysis.

REPLY

Debashis Basu

In Reply to Prakash Bhate 4 years ago

Some FACTS
1 Till last all our recommendations had a mechanical stop loss.
2. From last year we have recommended actual entries and exit levels. The results of all our recommendations are tabulated each year. No other publication does this
3. It is misleading to selectively pick up stocks that have fallen and that too well after our stop losses have been hit. As a portfolio, our recommendations have consistently beaten the Sensex, if all the recommendations were followed.
4. Last year's recommendations are here. See for yourself. The facts
http://moneylife.in/article/our-stock-pe...

vineeth kumar

In Reply to Prakash Bhate 4 years ago

Not surprised sir, I do not think moneylife team are as involved in fool proof analysis, thereby, compromising on QUALITY (UNBIASED). Off late, I was feeling let down by this sudden shift in marketing techniques to hold on. Logic's say - now they do not have proper time for "Analysis"...since, they seem to be in a chaos...I can prove - what I've noted from last two years...

Debashis Basu

In Reply to vineeth kumar 4 years ago

"Sudden shift in marketing techniques to hold on...."
Whatever that means :)

Suhas Purushottam Kakde

4 years ago

I would like to add in above list the name Resurgere mines & minerals ind ltd. please tell me what to do?
s p kakde.

kalyanasundaram n

4 years ago

Sir, a timely articel warning the innocent investors. Thanks for this article.

Madan Lal Hind

4 years ago

At some "expert"'s advice I bought AstraZenica Pharma India shares for about Rs 2600-00 per share about two years ago. Now it has crashed to about Rs 600.00 a share. I don't know how and why it so happened.I am at a big loss. I am a retired person, a senior citizen, 68 years old. I am in a dire strait. I seek your expert opinion: should I sell it now or should I wait for the day when the shares pick up to give me at least the money I had invested. I shall be grateful to you if you help me out.
Regards
M. L. Hind
14-A-2,
Hindustan Times Apartments
Mayur Vihar-1
Delhi-110091

T KUMARA SWAMY

4 years ago

can we find the list of such cos. in the website

Srinivas

4 years ago

jahan raja vyapari, vahan praja bhikari - this is the truth of what is happening in India - if someone investigates these companies, you will realize that their turnover is actually hawala transactions !

nagesh kini

4 years ago

Rameshbhai
Aap ne suna hoga ki 'duniya jhukti hai, jhukanewala chahiye'
aaj kal ki aam janaata bilkul lalchi hai, koi bhi badiya prospectus bade bade naam lagakar bazaar me ajeya, to unko paisa denge aur baad me pachtayege.

nagesh kini

4 years ago

Rameshbhai
Aap ne suna hoga ki 'duniya jhukti hai, jhukanewala chahiye'
aaj kal ki aam janaata bilkul lalchi hai, koi bhi badiya prospectus bade bade naam lagakar bazaar me ajeya, to unko paisa denge aur baad me pachtayege.

Dollar could strengthen more, creating headwinds for emerging markets, including India
The US dollar strength could prove a substantial headwind for emerging market relative performance, says Nomura Equity Research on the stock markets in India
 
From this point on, US monetary policy ‘normalization’ isn’t likely ever to recede far from market consciousness—leaving the US dollar structurally better supported medium-term, said Nomura Equity Research in its Global Equity Strategy report.
 
“Rounding the bend into H2 we remain focused on a likely global demand growth recovery into end-year as the most important determinant of medium-term equity performance. The pickup will be driven mostly by the US and Japan, but with spill-over benefits to other economies via trade and sentiment,” Nomura Equity Research said.
 
The US dollar strength, though, could prove a substantial headwind for emerging market relative performance. Indeed both stronger dollar prospects and China’s continued rebalancing away from investment-led growth leave us cautious on any robust or sustained energy/ metals price recovery in the second half of 2013. This would be particularly tough on the world’s extractive economies and/or primary industry-heavy markets, the brokerage opined.
 
While higher Treasury yields and resulting dollar gains ultimately reflect a strengthening US economy, Nomura is looking at a material impact on US earnings—for example the roughly 48% of S&P 500 earnings that come from outside the US, as well as that portion of recent supernormal US profits enabled only by (unsustainably) low corporate debt costs.
 
But for many of the non-US, non-EM markets—broadly, the ‘EAFE’ space—these trends need not pose an obstacle. If anything, with central banks in Japan and Europe still decidedly easing even as the Fed starts ticking through its re-entry checklist, monetary policy at the margin has begun more explicitly to favour its overweights in those two developed
Markets, says Nomura. And unlike market-destabilizing EM FX volatility, yen and euro downside (versus the dollar) would be viewed primarily as growth- and equity-positive – both as an export boost and reflation accelerant, the brokerage believes.
 
Nomura sees less to cheer about for developed Asia-Pacific markets though: Hong Kong’s property preponderance and dollar peg—a deflationary factor when its US-dollar anchor strengthens—leaves it vulnerable. And Australia’s ‘rebranding’ over the past year from passé ‘China play’ to ‘yield play’ turns out to have bought it only a brief reprieve now that receding Treasury fortunes have soured the yield-stock honeymoon too.
 
With recent US economic data pointing to a rather smart H2 US rebound coming together from the fiscal ‘sequester’-induced Q2 soft patch, we return to the notion that a US growth recovery should itself be the main argument for US equity underperformance, as stronger US demand supports global growth rates (and/or reduces global recession risks) and should underwrite an improvement in global investor risk tolerance as well, believes Nomura. After all, US stocks outperformed on the GFC downside as investors sought at-least comparative safe-haven exposure – a pattern that should technically be expected to reverse on the upside.
 
The prospect of eventual Fed tightening has not proven historically to catalyze outperformance by US stocks. Rather, more often than not, non-US developed (i.e. EAFE) equities have outperformed the US in the months immediately prior to and post Fed tightening:
 
Rounding the bend into H2 Nomura reiterates an underweight US equity allocation recommendation in favour of Japan, Developed Continental Europe (ex-UK) and EM Asia—where we see varying combinations of more conservative relative valuations and earnings assumptions, substantial equity under-ownership levels, and/or greater leverage to the likely pickup in US demand and ongoing decline in recent key global risks (such as intra-European politics and US fiscal uncertainty).
 
A common critique of Japanese stocks we often used to hear in recent years was that Japan “offers too little growth for the growth investors, but too little value for the value investors.” But arguably, with Japan’s robust earnings upgrades since late-2012, Japan now offers attractions from both the growth- and value perspectives.
 
It is instructive to note that despite their 63% net local-currency gains since mid-November, Japanese equities continue to present substantial value. In short, the Nikkei’s massive gains of the past seven months were not taking stocks into richly valued territory but have merely been reducing a state of deep undervaluation that reflected Japan’s poor economic performance amid the overly tight monetary policy of the past six years, when the other major central banks of the world were loosening with abandon and the BOJ was not, noted Nomura.
 
Thus, it was proved no great difficulty for Japan stocks to engineer a smart 15% locally denominated rebound since bottoming 13th June (and 7.8% even in US dollar terms), making it still the world’s best-performing major market/ region in dollar terms since the start of the second quarter.
 
The Japan sectors that thus far have rebounded the strongest from the volatility of May-June have largely been the more defensive sectors such as Telecoms, Consumer Staples, Healthcare and Utilities. But this should leave more upside room for the more cyclical and higher-beta sectors, we believe, as demand data and positive political developments materialize in the weeks ahead.
 
It is indeed hard to envision any sustained ‘success’ of Abenomics without a pickup in corporate capital spending. But Nomura’s Japan economics team notes that METI data for manufacturing capacity utilization at 76.7% (they regard 75% utilization as a threshold level for capex) as well as measures in the 11th January ‘emergency’ stimulus package to promote capex via advantageous tax-treatment and fiscal subsidies—as well as in the FY13 tax reform outline approved by the Cabinet on 29th January.
 
These incentives appear to have taken root in the substantially improved outlook revealed by the BOJ’s June-quarter Tankan survey (released on 1st July), in which large corporations’ capex plans were for a +5.5% y-y investment increase, up 7.5 percentage points from the -2% y-o-y decline suggested in the March survey, noted Nomura.
 
With such evidence accumulating of a secular reflationary inflection point in both household and corporate spending, one can’t help noticing the strong rebound already underway in both consensus GDP forecasts and (more to the point for equities) FY2014 consensus earnings estimates .
 
European (ex-UK) equities generated solid outperformance relative to their US counterparts in H2 2012. From 18th June through end-year, continental Europe provided a 19.1% total return in local-currency terms, versus much more muted 5.6% US returns. But since then European ex-UK stocks have turned laggard again, returning only 7% YTD against the US’ more robust 16.2%.
 
Among major sectors, only European Tech Hardware managed to outperform its US counterpart. Strong performance from Sweden-based Ericsson and Holland-based ASML drove gains in the former, but it was the 17% slide in Apple shares that was the biggest determinant of European outperformance over the US. Outside of this sector, virtually everything else in Europe lagged in H1 2013, with underperformance particularly strong in the Financials, Energy, Consumer Discretionary and Utilities sectors, noted Nomura.
 
Several factors were behind this broad-based relative performance reversal. For one, the US was relatively oversold heading into year-end due to ‘fiscal cliff’ concerns. Despite the economic drag that fiscal tightening is currently exerting on US growth, equity investors overestimated the impact, leaving the market ripe for a solid rise said the Nomura report.
 
Europe continued to rise into the late-May global correction, but gains during ‘risk-on’ phases have been weaker, and declines during global equity correction phases have been more severe. Importantly, gains on the back of ‘normalization’ had already occurred. Indeed, the sovereign spread tightening that occurred from the beginning of this year to the May lows was more modest (66bps on the 10-year Italian/Bund yield spread versus 131 in the June-Dec 2012 period). 
 
Against this backdrop—and considering that demand in Europe has stagnated—there was less reason for investors to push European stocks higher. Meanwhile, following the back-up in global bond yields that followed Fed chairman Bernanke’s 22nd May ‘tapering’ comments, willingness to hold equities in a highly indebted region where the monetary policy  transmission mechanisms are struggling to work declined even more sharply.
 
Looking ahead, Nomura believes this period of European equity market underperformance is largely behind it, and sees risk/reward as tilting back in continental Europe’s favour.
 
However, Nomura’s economists remain pessimistic on Europe’s own economic growth prospects, expecting quarterly real GDP growth in the Eurozone to be exactly 0% in H2 this year, as well as throughout 2014. “Against this backdrop, our recommended sector positioning generally de-emphasizes European sectors with relatively high domestic exposure. The main exceptions are Telecom Services, where we recommend a Neutral allocation, and Financials, where we are overweight,” says Nomura.

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Westlife Development: Low or no volumes and 2,20,000% price rise!

Westlife Development has been locked in an upper circuit almost non-stop since January 2009. The reason: McDonalds' franchisee Hardcastle Restaurants became a direct subsidiary of this listed company. But why is it not classified an illiquid stock coming under the purview of the new call auction regulation?

Over the past seven trading days, the share price of Westlife Development has gone up by nearly 15% with just one share being traded every day. The stock has been hitting the upper circuit limit on each of the seven days. Over the past year the stock has moved up by over 3,531% from Rs7.88 on 21 May 2012 to Rs286 as on 3 July 2013. Excluding the bulk deals, on an average just 2-3 shares have been traded per day over the one year period. Westlife Development (Earlier named: Dhanaprayog Investments Co) used to offer investment and allied financial services, its license as a NBFC was cancelled in 2009. In December last year, Hardcastle Restaurants, the franchisee of American fast-food chain McDonald's, became a 100% subsidiary of Westlife Development. A company which is similar to Jubilant Foodworks? That’s what leading media houses think. A headline in the Economic Times reads, “Reverse merger makes McDonald’ franchisee parent Westlife Developments market darling.” A “market darling”, in which the ‘market’ cannot participate.
 


Three years back in June 2010, we had reported about the unusual trading and the huge surge in price at that time as well. (Read: Unquoted) Despite the poor financials, its stock price had gained 4,307% from 1 January 2009 to 27 April 2010. Trading volumes were suspiciously inconsistent over this period as well. There was no attractive business strategy that would sustain the price quoted. Obviously, some people knew what they were doing.
 

So what, rather who is driving this stock up to new highs? As per the latest shareholding disclosure dated March 2013, apart from the 12 shareholders that form the promoter group making up for 75% of the total shares, there are just 52 other shareholders of the company. Out of these 52 shareholders, four hold nearly 24.17% of the total number of shares. The remaining 0.83% of the shareholding (equivalent to approximately 1.50 lakh shares) is divided among the remaining 48 shareholders.
 

Insider Trading?
 

The BL Jatia group holds majority stake in Westlife Development. The Jatias have the McDonald franchise in India. There have been several bulk deals between the promoters - the most recent one on 19 June was the transfer of 6.30 lakh shares from Ushadevi Jatia to Amit Jatia. Earlier, the promoter Ushadevi Jatia had transferred 6.25 lakh shares to Smita Jatia, another promoter of the company. There have been several inter-promoter bulk deals in the past as well.
 

The market regulator recently came up with a regulation for illiquid stocks (Read: Curbing manipulation in illiquid stocks: Another harebrained idea by SEBI?). The company, however, is not classified as an illiquid stock despite the poor trade volumes. According to the watchdog, an illiquid stock is a stock that satisfies all of the following criteria:
 

 1. The average daily trading volume of the scrip in a quarter is less than 10,000;

 2. The average daily number of trades is less than 50 in a quarter;

 3. The scrip is classified at illiquid at all exchanges where it is traded.

Strangely, this company has managed to escape the purview of this regulation even though, excluding the bulk deals, on an average just 2-3 shares have been traded per day.
 

Regulatory charges
 

The company in the past has delayed in making disclosure of changes in shareholding to stock exchanges as required under regulation 6(4) of SEBI Takeover Code, 1997. Vide a consent order the company reached a settlement to pay just Rs30,000 in April 2009. Moneylife has pointed out earlier that consent orders have been inadequate in curbing malpractices. (Read: Are SEBI’s consent orders a sham?).
 

Winmore Leasing & Holdings which is a part of the promoter group of Westlife Development also reached a settlement of Rs1 lakh through a consent order in July 2009 for failure in making disclosure of shareholding/changes in shareholding to stock exchanges as required under regulations 6(2),6(4) for year 1997 and 8(3) for years 1998 to 1999 of SEBI Takeover Code, 1997.
 

Stock manipulation in the Indian market is rife. In every issue of Moneylife magazine we publish details of one such stock being manipulated in the ‘Unquoted’ section. Regulators may pretend that all is fine with the Indian markets but you would be astounded by the extent of price manipulation that goes on regularly under the nose of the market regulator Securities and Exchange Board of India (SEBI) and the two main stock exchanges, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). We have written a cover story as well on this issue (Read: Stock Manipulation). The regulator is unconcerned.

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COMMENTS

Sunil Arora

4 years ago

Interestingly there are only 64 shareholders in a public limited company that is listed on the premier stock exchange like BSE and not a regional dormant SE. By definition listed companies need to be "WIDELY HELD". A public limited company that is unlisted is required to have at least 50 members. So 64 is barely above that number. But a listed company having only 64 shareholders? What is SEBI doing. Is there a cell that tracks things like these in SEBI.

It would appear that while SEBI is hell-bent on getting every listed company to have a minimum of 25% shareholding in public hand( rightly so ) and penalizing managements of companies that fail to comply ( Gillette being the latest ), there seems to no effort to discipline companies like Westland that find loopholes and exploit them to the limit.

I have tried to buy shares of this company for the past many months but have failed to get even a single one. When stocks can get locked in circuit breaker on trading of a single shares, it makes me wonder what people at BSE are doing?

Anil Agashe

4 years ago

Great article! Can a PIL be filed against SEBI for it's inaction on such instances which have been brought to its attention?

REPLY

Sunil Arora

In Reply to Anil Agashe 4 years ago

I am sure an RTI application would do the trick and one does not need to go to the extent of filing a PIL

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