M and B Switchgear, with ‘below average’ fundamentals, closed at a premium of 71% after falling 34% from its listing price on 20th October. Five firms controlled by a common director seem to have made a consolidated profit of Rs8.41 crore from the opening day's trading alone
Yesterday (Is IPO price manipulation back? Two recent issues have witnessed extreme gains & losses ), we had reported on how newly-listed company M and B Switchgears, had closed at a premium of 71% (after falling 34% from its listing price during the course of the day). Moneylife has highlighted cases of IPO (initial public offering) manipulation a number of times in the past—and the article on 20th October had analysed three IPOs, to examine whether the players are back at their game again.
Now that really seems to be the case.
After going through the bulk deals available on the website of the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), we unearthed some startling facts. Three firms —A Jain and Company Pvt Ltd, Prabudh Securities Pvt Ltd and Satvik Securities Pvt Ltd, traded 1 lakh shares (of M and B Switchgear) each on the BSE and another two firms—Eshan Financial Services Pvt Ltd and Vimal Finstock Pvt Ltd traded 1 lakh shares each of the same company on the NSE.
This may seem like no big deal to some. However, all of the above firms entered within a price band of Rs128-Rs130—the intraday low for M and B Switchgear on the BSE was Rs118 on 20th October. Not only did all these entities enter at the same price, they shockingly exited within a price band of Rs296-Rs298.
And here’s the clincher. The director of all the five firms is the same person—Anoop Jain. All the mentioned companies are registered in Delhi and made a consolidated profit of Rs8.41 crore from this IPO deal on 20th October. And of course, all this is happening right under the nose of the market regulator and the stock exchange.
Why is this case suspicious? First, why would anyone sink Rs6.50 crore into an IPO, which by nature is a volatile offering? And more important, M and B Switchgear’s IPO was rated with ‘Grade 2’, indicating ‘Below Average’ fundamentals. On 19th October, Taksheel Solutions’ IPO had tanked from Rs150 to Rs55 after listing. Seeing the volatility and risk in the IPO market only a brave—or very foolish—person or entity would have invested in these offerings, unless they had some prior information that the share price would shoot up.
Further research by Moneylife showed that stockbroker A Jain and Company has been charged by market regulator SEBI (the Securities and Exchange Board of India) for committing irregularities in respect of contract notes, not maintaining segregation between client funds and own funds, dealt with brokers of other exchanges without SEBI registration as a sub-broker, did not report off-the-floor transactions to the exchange and defaulted in maintenance of stock register. However, no regulatory action has been taken so far. A Jain and Company had been suspended in 2003—for just 6 months—by the market regulator.
Moneylife has reported many times in the past that SEBI has made a mockery with its consent orders. We have often seen that offences—that required strict corrective action—were let off with a slap on the wrist. The regulator has been somnolent throughout these price-riggings in the past—and sadly, it has not yet woken up to the reality if this case is any indication.
The RBI and the government are confronted with fresh challenges of weakening rupee which puts further pressure on inflation. Besides, slackening industrial growth leaves limited choices for the RBI and the government, especially in view of difficult global economic environment
New Delhi: Ahead of credit policy review, Reserve Bank of India (RBI) governor D Subbarao on Friday met finance minister Pranab Mukherjee and discussed ways to deal with spiralling prices aggravated by a weak rupee, reports PTI.
“I came to review the macro-economic situation with the finance minister...” Mr Subbarao told reporters after his meeting with Mr Mukherjee.
He said this was a standard practice for the RBI governor to discuss the state of economy with the finance minister before the review of the monetary policy. The RBI policy review is scheduled on 25th October, a day before Diwali.
The central bank has hiked interest rates by 350 basis points since March 2010 to deal with the persistent high inflation, including rising prices of food items.
The RBI and the government are confronted with fresh challenges of weakening rupee which puts further pressure on inflation. Besides, slackening industrial growth leaves limited choices for the RBI and the government, especially in view of difficult global economic environment.
Mr Subbarao and Mr Mukherjee also discussed the situation arising out of the rupee weakening to a 28-month low and crossing 50 to a dollar mark.
“We reviewed the macro-economic situation. Everything that is under macro-economy was discussed,” Mr Subbarao said.
Earlier, in the day the finance minister emphasised the need for better coordination between the government and RBI.
He said the global economic developments have “once again brought into focus the need for better co-ordination between monetary and fiscal policies towards improving overall economic stability and growth”.
Worried over high inflation, Mr Mukherjee said the government has to tackle the supply side constraints.
“I am worried that food inflation has reached double digit figure. The last week figure was 10.62%. Of course, for previous two weeks it was perilously close to double-digit figure. But it crossed that limit,” Mr Mukherjee said.
While the food inflation has touched a six-month high of 10.6%, the overall rate of price rise measured on the basis of Wholesale Price Index (WPI) is stubbornly close to double digit since December last year.
A weak rupee is also adding to the inflationary pressure as it pushes up the landed cost of imported commodities. India depends on imports to meet 80% of its crude oil requirement. It also imports a large quantity of vegetable oils and pulses.
According to certain media reports, Kotak Bank has slapped a legal notice on Trident Microfin for a dishonoured cheque. But the microfinance institution is under a CDR plan. This is a peculiar case—and there are a number of legal issues and questions surrounding this move
In the last couple of days, we have had news releases that claimed that “Kotak Bank has slapped a legal notice on Trident” (Kotak Mahindra Bank slaps legal notice on Trident, 19 Oct, 2011, PTI ), which is part of a CDR (Corporate Debt Restructuring) plan. And we have had various stakeholders condemning the action already. Moneylife decided to look into the various (legal issues and questions) surrounding this peculiar happening where a company committed to a corporate debt restructuring (CDR) has been apparently sent a legal notice.
As always, we provide a background and then delve into the various issues. “Trident is one of the five MFIs in Andhra Pradesh that became part of a corporate debt restructuring (CDR) plan, under which it had recast its debt” (http://www.thesundayindian.com/en/story/kotak-mahindra-takes-trident-microfin-to-court/3/24623/). Trident’s Managing Director, Mr Puli, said, “We received a legal notice on October 14. We had taken Rs4 crore loan from Kotak Bank and repaid Rs2.6 crore but could not service the remaining Rs1.6 crore, hence the court notice,” (http://news.in.msn.com/business/article.aspx?cp-documentid=5526776&vv=1200). However, according to Mr Puli, Kotak “was not part of Trident's CDR program” (http://www.thesundayindian.com/en/story/kotak-mahindra-takes-trident-microfin-to-court/3/24623/). Without doubt, this unusual happening raises a lot of questions indeed but before we get deeper into the issues, let us get to know Trident, the microfinance institution.
According to http://www.tridentmicrofin.com, “Trident Microfin Private Ltd. (formerly Annapurna Financial Services Pvt Ltd) is a new generation microfinance institution established in 2007 and headquartered at Hyderabad in Andhra Pradesh, India. The Company was promoted by highly qualified microfinance professionals with the motto 'to reach the unreached'. The overarching goal of the company is to provide comprehensive financial and business solutions to low income individuals and enterprises. The primary objectives are: a) To ensure that no bankable poor are left behind in the area of our operation; and b) To provide comprehensive financial and business solutions to low income individuals particularly women and micro-enterprises. Trident’s growth over the last few years is given below: