Due to the sharp fall in price of the scrip on the listing day (from around Rs60 to Rs18.10), genuine investors who had purchased the shares on the first trading day have been left with no option, but, to continue holding the shares which have hardly any value and thus incurring huge losses
As part of the nationwide crackdown on Initial Public Offerings (IPO), the Securities Exchange Board of India (SEBI) has barred Tijaria Polypipes (TPL) as well as several individuals and stock brokers from accessing the securities market. As reported earlier, Hem Securities, the merchant banker to the issue, was spared from any wrongdoings. Incidentally, the merchant banker has had a history of violations in the past (see http://www.moneylife.in/article/72/22897.html).
On 27 September 2011, the company raised Rs60 crore to fund its proposed expansion and diversification plans at Rs60 per share. On 14 October 2011, the day of the listing, the stock trended much of the day between Rs40 and Rs60 before it collapsed to Rs18.10 towards the end of the day. SEBI received a complaint alleging insider trading and artificial volumes had caused huge losses to retail investors.
An investigation exposed a shocking tale of manipulation and deceit through the collusion with certain retail and qualified institutional buyers (QIBs). The three QIBs—Sparrow Asia Diversified Opportunities Fund, Credo India Thematic Fund (CREDO), and IPRO Funds were clearly allowed to exit the stock on listing day at a premium to the issue price. They exited at an average price of Rs62 per share, while the stock closed at Rs18.10 towards the end of the day.
The higher exit for QIBs was orchestrated through a set of brokers, namely—Grishma Securities Pvt Ltd (Grishma), Parklight Securities Ltd, Pinac Stock Brokers Pvt Ltd, and Volga International. These stock brokers used certain individuals as front-runners to buy the stock from QIBs and retail allottees who wanted to sell them. These individuals were neither original allottees nor subscribers to the IPO of TPL. A simple Google search will show that Parklight Securities has been habitually in trouble—it was banned for six months in 2003 was involved in the infamous Nissan Copper case and at least 15 other cases of manipulation. Each time, a generously indulgent SEBI allowed it to escape with a minor suspension, illegal administrative warning or a paltry settlement under its consent order scheme (see http://www.watchoutinvestors.com/history.asp?def_code=C0003520 ). Doesn’t this warrant a full fledged investigation?
These stock broking entities were creating artificial volumes in the scrip by carrying out structured reversal of trades, thereby inducing the innocent investors to purchase the shares of the company on the first day of its listing.
One of the stock brokers, Grishma, had used one particular client, Jivraj Zala to trade heavily in the scrip of TPL on the listing day leading to a loss of over Rs9 crore, without collecting any margin from the person. How did Grishma fund Mr Zala? Grishma manipulated the client ledger of Mr Zala to give an impression that there were funds in his account, by using other clients’ funds. This is not all. There were several other brokers who were front-running select clients in this manner, as well.
Grishma abused the KYC process by allowing Mr Zala to rack up several crores of losses, Rs9.95 crore to be precise, and yet KYC records showed that he had only an annual income of less than Rs4 lakh.
TPL lied in its prospectus that it had not raised any “bridge loans” when it had actually raised as much as Rs12.5 crore through inter corporate deposits (ICDs). According to the company, the ICDs were used to meet “business needs for a project under consideration”.
The companies that were issued ICDs, namely Nihita Financial Services Pvt Ltd, Bellisima Impex, Balasaria Holdings, were involved in diverting the IPO proceeds of TPL to select individuals and entities. For instance, Bellisima Impex transferred money received from TPL towards ICDs repayment, to Jivraj Zala, the very same retail client who lost crores of rupees.
Moreover, when the company was asked to produce evidence of ICD agreement papers, it produced fabricated copies, which were done in a very shoddy and amateurish manner, thinking it could outwit SEBI. Why did Hem Securities, the merchant banker to the issue, not verify this material fact?
To cut a long story short, TPL had orchestrated a very convenient exit for QIBs and certain retail allottees by arranging certain stock brokers to have a counter-party ready in order to buy out the IPO allottees at high prices, before the price plunged from roughly Rs62 to around Rs18.10. Due to the sharp fall in price of the scrip, genuine investors who had purchased the shares on the first day of listing have been left with no option, but, to continue holding the shares which have hardly any value and thus incurring huge losses.
The entire modus operandi was conducted in similar fashion with other brokers and entities which can be described in the graph below:
As a directive, SEBI has ordered TPL to deposit roughly Rs45 crore in an escrow account until further orders. This means the investors will not be getting back their money soon
The G-Sec Portal provides an opportunity for retail investors to invest in Government securities, as an attractive alternative investment avenue.
IDBI Bank Ltd. has launched India's first online retail G-Sec Portal. This Portal provides an opportunity for retail investors to invest in Government securities, as an attractive alternative investment avenue. Government Securities are bonds issued, both by Central and State Government. IDBI Bank organized a function to launch the portal which has been christened "IDBI Samriddhi G-Sec Portal". This Portal will become operational from 17 January 2012.
The function to launch the Portal was attended by a large gathering of HNIs (high net worth individuals) and senior officials from co-operative Banks. The launch of the Portal was done in the presence of senior officials of RBI (Reserve Bank of India).
RBI during various policy pronouncements has been emphasizing the need for banks to take necessary steps for providing the infrastructure for retail investors to make investments in Government bonds. Melwyn Rego, executive director, IDBI Bank Ltd., mentioned that, "IDBI Bank has been a pioneer in introducing a number of new financial products and services. The launch of the IDBI Samriddhi G-Sec Portal is one more such pioneering initiative. Retail investors having access to the internet and a Demat account can now freely buy and sell Government Bonds at the click of a button through IDBI Bank's website, thereby making the entire transaction transparent and a seamless process. This initiative by IDBI Bank is the first organized effort to channelize retail savings into Government bonds through a dedicated Portal. Retail investors thus get a rewarding opportunity to participate in the India Growth Story."
Though growth during the month under review was not robust, it was higher than in November, when overseas shipments grew by just 3.8%
New Delhi: India's exports growth remained subdued at 6.7% year-on-year in December on account of poor demand in Europe and the US, but the government is hopeful of achieving its $300 billion target for the current fiscal, reports PTI.
Though growth during the month under review was not robust, it was higher than in November, when overseas shipments grew by just 3.8%.
In sharp contrast, imports grew at a faster pace of 19.8% year-on-year to $37.8 billion in December, translating into a trade deficit of $12.8 billion, commerce secretary Rahul Khullar told reporters here.
During the April-December period this fiscal, exports aggregated $217.6 billion, a year-on-year growth of 25.8%, thanks to the surge witnessed in the early months of the fiscal.
From a peak of 82% in July, export growth slipped to 44.25% in August, 36.36% in September and 10.8% in October.
“If you get $80 billion exports in the remaining quarter (January-March, 2012), you are looking at close to $300 billion. And imports may touch about $460 billion,” Mr Khullar said.
Experts opined that the country’s exports growth for the entire fiscal will stand at about 20%.
During the first three quarters of the current fiscal, imports were up by 30.4% at $350.9 billion. The trade deficit stood at $133.3 billion during the period.
“At current reckoning, provided that exports pick up in the next three months, you are looking trade deficit in the neighbourhood of $155-$160 billion,” he said.
Mr Khullar said exports by all major sectors are doing well. During April-December 2011, engineering and petroleum exports were up by 21.6% and 55%, respectively, at $45.3 billion and $43.9 billion.
Other sectors that registered healthy growth include gems and jewellery (38.5%), ready-made garments (23.7%), electronics (21.1%), drugs (21.5%), marine products (32.2%) and plastics (43%).
“Even today, exports have grown, taking into account all the corrections that have been made, all the deceleration that has taken place. At this rate, you are looking at a growth rate of 20% during the fiscal. It could be more,” he said.
However, iron ore exports declined by 18% to $3.2 billion.
During the first three quarters of 2011-12, petroleum imports were up by 40.4% at $105.6 billion.
Other sectors which registered growth include gems and silver (53.8%), machinery (27.7%), electronics (21.1%), chemicals (23%), coal (62%), fertilisers (35%), vegetable oil (55%), iron and steel (12.1%).
The secretary further said during the first quarter this fiscal, oil exports were up by 75% over the same period last year. However, in Q2, they went up by 70% and in Q3, they increased by just 22%.
“In Q1, oil exports were high because of prices and then the price effect was washed away (in Q2 and Q3),” he said.
Giving a forecast on India’s exports during 2012, he said: “It is going to be very difficult year, it’s too uncertain at this point of time. There are uncertainties prevailing in the Eurozone and in the US.”