IPO manipulation is back with a bang. Five firms with one director, and a profit of nearly Rs9 crore

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.




5 years ago

I know of certain bombay and delhi based operators who trap unsuspecting small investors in these IPO's .. I have been a victim of this to the tune of lakhs . Suggest we should unite to form a group to fight these evil monsters ..


5 years ago

SEBI is supposed to be active in manipulations in the market by the brokers community...but what SEBI does is screwing up the MF it seems SEBI is afraid of they being sidelines if the MF industry come up well....

Is SEBI bosses being taken care by brokers as so many consent orders are being metted out to the erring brokers.


5 years ago

All these play is happening only because of the non existence of circuit filter on day one. So, on listing day trading should be permitted only on delivery basis .Then the price will be discovered by true buyers and sellers and from next day onwards it should removed from T2T and circuit filter should be applicable. This will help to discover a true price.



In Reply to Rajesh 5 years ago

Hi rajesh, is there any regulatory mechanism which could help small retail investors to tackle these rampant market manipulators .


In Reply to sanjay 5 years ago

Hi Sanjay
SEBI will make an enquiry later and collect some money based on a consent order.By that time operators will make crores and crores and share a part of it with the parties who are investigating .So no strict action against these culprits .Only loosers are retail investors.

nagesh kini

In Reply to Rajesh 5 years ago

The toothless tigers Regulators don't get any wiser even after the event.
Imprisonment exceeding 10 years and not consent which are any way picked up by the companies.
Send the perpetrators to jail a la Rajrathnam in the USA.


5 years ago

It looks like that people will be much more happy and comfortable if these stock exchanges (now they should be called govt sponsered casinos) are closed along with the so called BULLDOG siiting inside casinos(our regulator SEBI)-then atleast people will have more money to sepnd on diwali crackers,we dont need these falsyfying institutions anymore now.because they have lost their actual purpose and they are acting totally in favour of ELITE ruling class of this country,JUST SCRAP THEM FOR WELFARE OF THE SOCIETY.

arun adalja

5 years ago

sebi must impose restriction on bulk deal such as if shares are purchased under big deal cannot be sold on the same day and it is to kept atleast 30 days in case of ipo/fpo etc.i think this measure can avoid manipulation.


5 years ago

SEBI is either unwilling or unable to catch manipulators, unless there is a vested interest. If they are unwilling, then there is no difference between them and the manipulators. Perhaps some of them are hand in glove. If they are unable, which seems more likely, it looks lika a fit case for closing down an agency which is unable to do anything.
It seems to be developing in to a post mortem specialist rather than a preventive or curative one.
There should be a public debate on whether SEBI should cease to appoint people from govenment service at all. The problem seems to start from there.

Dr Vaibhav Dhoka

5 years ago

SEBI,NSE &BSE board members and higher officials have coterie and are all anti small investors.Their all actions are only to benefit Big brokers,and CONSENT ORDER system is like convicting murder accused u/s 302 and let him free by just giving him warning.Now is festive season and coterie needs funds for celebration and there will be no action.Scores site is a defunct aborted baby from SEBI giving false hope for small investors.My complaint against Kotak Sec Ltd is pending for last 7 1/2 years SEBI officials joining hand with this high profile broker who is member on advisory group on Securities regulation SEBI wants investors to take arbitration route which is a perfect case of CORRUPTION at SEBI,NSE & BSE.These things are bound to happen in cyclical manner.


5 years ago

pardon my french but with such bullsheee---------t going on is it any wonder there ae so few (relative to general investors community) retail investors in the stockmarkets ?
again hats off to you for tracking down such scamsters
by the way all 5 companies being private comps from where did get info on the directors ?
if such info is freely available in the public domain please tell your readers how to get such info on pvt investment companies we see popping up everyday on the bulk deals section?


nagesh kini

In Reply to rajesh 5 years ago

Try SEBI and/or BSE and/or ROC. Good luck!

sanjay shah

5 years ago

First of all no new allowed to enter the market with ipo,if it had no consecutive track record of profit in past 3 years.There should b guideline in charging premium.After the isssue if market price of share falls below issue price then co.has to compulsory buy back shares at issue prise upto 3 weeks from date of listing. This will prohibit unnecessary premium & manipulation in share price. Circuit is to applied on day of listing.


nagesh kini

In Reply to sanjay shah 5 years ago

This book-binding valuation is a sham. The good old Controller of Capital Issues was a saint in comparison to the satan in SEBI.


In Reply to nagesh kini 5 years ago

Tnks Nagesh the names of directors putting crores in onelife will surely make interesting reading


5 years ago

Sebi, Nse and Bse know what's happening. who knows they are also part of the game? corporate affairs minister bhi ye sab kuch jante honge apne desh me ye sab log public ko bevkoof bana rahe hai. sub kuch bhagwan k bharose chal raha hai yaha kisi ko kuch nahi hone wala


5 years ago

Well, all the market people know how this things are allowed.We all know the NOBLE INTENTIONS of all the regulators & have no sympathy for so called naive small investors,who indulge in such scripts.If anyone is serious abt these things then they should allow trading in new scripts for first 15 days in Trade for Trade segments only.

Vikas Gupta

5 years ago

Thanks once again to Moneylife Team to bring the facts of manuplation of Stock prices by Stock Brokers to the Common man. About SEBI, NSE, BSE or other Industry Watch Dogs, they are meant for small players only. They don't take any actions against Big Players themselves instead they don't give any heed to Complaints against Big Players. Corruption might be one of the reasons behind them. I myself have registered many complaints to SEBI through SCORES against HDFC Mutual Fund, Karvy MFS & Stock Broker M/S S S Corporate Securities Ltd., Delhi about many anamolies I had come across while dealing with them but till date I have not received any response.


5 years ago

Sebi, Nse and Bse know what's happening. who knows they are also part of the game?

Nagesh Kini FCA

5 years ago

Jeson has a great report.
Sets us thinking whether our Market Regulator has already gone into the Diwali vacation!
If the SEBI fails to act in such blatant violations and breaches of their so-called effective 'checks and balances' it is high time the MCA steps in to wind it up - it is neither a tiger that can bite, let alone roar, it isn't even a cat that purrs, leave alone being a watch dog.

RBI governor meets FM ahead of monetary policy review

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.


Trident Microfin is under a Corporate Debt Restructuring plan: How can Kotak Bank slap a legal notice on the microfinance institution?

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” ( 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,” ( However, according to Mr Puli, Kotak “was not part of Trident's CDR program” ( 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, “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:

As noted above, several issues arise from this rather strange happening to an MFI that is a part of the CDR mechanism. “CDR is a non-statutory mechanism which is a voluntary system based on Debtor-Creditor Agreement (DCA) and Inter-Creditor Agreement (ICA). The Debtor-Creditor Agreement (DCA) and the Inter-Creditor Agreement (ICA) shall provide the legal basis to the CDR mechanism. The debtors shall have to accede to the DCA, either at the time of original loan documentation (for future cases) or at the time of reference to Corporate Debt Restructuring Cell. Similarly, all participants in the CDR mechanism through their membership of the Standing Forum shall have to enter into a legally binding agreement, with necessary enforcement and penal clauses, to operate the System through laid-down policies and guidelines. The ICA signed by the creditors will be initially valid for a period of 3 years and subject to renewal for further periods of 3 years thereafter.” (Quoted from ““Revised Guidelines on Corporate Debt Restructuring (CDR) Mechanism”,

The legal basis to the CDR System has two basic categories and these are described below:

CDR for Standard and Sub-Standard Accounts: “The Inter-Creditor Agreement would be a legally binding agreement amongst the creditors, with necessary enforcement and penal clauses, wherein the creditors would commit themselves to abide by the various elements of CDR system. Further, the creditors shall agree that if 75% of creditors by value and 60% of the creditors by number, agree to a restructuring package of an existing debt (i.e., debt outstanding), the same would be binding on the remaining creditors. Since Category 1 CDR Scheme covers only standard and sub-standard accounts, which in the opinion of 75% of the creditors by value and 60% of creditors by number, are likely to become performing after introduction of the CDR package, it is expected that all other creditors (i.e., those outside the minimum 75% by value and 60% by number) would be willing to participate in the entire CDR package, including the agreed additional financing.” (

CDR for Doubtful Accounts: “There have been instances where the projects have been found to be viable by the creditors but the accounts could not be taken up for restructuring under the CDR system as they fell under ‘doubtful’ category. Hence, a second category of CDR is introduced for cases where the accounts have been classified as ‘doubtful’ in the books of creditors, and if a minimum of 75% of creditors (by value) and 60% creditors (by number) satisfy themselves of the viability of the account and consent for such restructuring, subject to the following conditions:
a.    It will not be binding on the creditors to take up additional financing worked out under the debt restructuring package and the decision to lend or not to lend will depend on each creditor bank / FI separately. In other words, under the proposed second category of the CDR mechanism, the existing loans will only be restructured and it would be up to the promoter to firm up additional financing; and
b.    All other norms under the CDR mechanism such as the standstill clause, asset classification status during the pendency of restructuring under CDR, etc., will continue to be applicable to this category also.” (

Hence, from the above it is clear that if “75% of creditors by value and 60% of the creditors by number, agree to a restructuring package of an existing debt (i.e., debt outstanding), the same would be binding on the remaining creditors.”  (

That being the case, the first question that arises is how could Kotak bank initiate legal action? Does it mean that 75 % of creditors by value and 60 % of the creditors by number did not agree to the restructuring package for Trident? That needs to be clarified by Trident and Kotak bank. It should also serve as a first point of investigation by the CDR system as it looks into the peculiar happening.

And when less than 75% of creditors by value and 60% of the creditors by number agree to a restructuring package and some creditors (those who did not agree to the CDR package) take legal action, the CDR system must provide guidance to debtor’s on what exactly they can do? A solution is certainly needed here as otherwise, the whole exercise becomes meaningless and perhaps, even counter-productive.

Second, “The Debtor-Creditor Agreement (DCA) has a legally binding ‘stand still’ agreement binding for 90/180 days whereby both the debtor and creditor(s) agree to ‘stand still’ and commit themselves not to take recourse to any legal action during the period. ‘Stand Still’ is necessary for enabling the CDR System to undertake the necessary debt restructuring exercise without any outside intervention, judicial or otherwise. However, the ‘stand still’ is applicable only to any civil action, either by the borrower or any lender against the other party, and does not cover any criminal action. Besides, the borrower needs to undertake that during the ‘stand still’ period the documents will stand extended for the purpose of limitation and that he would not approach any other authority for any relief and the directors of the company will not resign from the Board of Directors during the ‘stand still’ period.” (

In fact, the Delhi High Court Notes {CS (OS) No.2278/2011}, “Once the CDR process is commenced, as per the Regulation of Reserve Bank of India and the Debtor Creditor Agreement, there would be a standstill period of 90 days during which time both the plaintiff No.1 and defendant Nos.3 and 4 and the lending banks are barred from taking/continuing any legal action.” (

Given this, the second question is how can Kotak bank initiate legal action therefore if indeed 75 per cent of creditors by value and 60 per cent of the creditors by number, had (in fact) agreed to a restructuring package of an existing debt (i.e., debt outstanding)? And given the above scenario, a further question that arises is whether the CDR system will initiate any penal action against the concerned bank? Again, clarity on this aspect is required in the CDR system.

Having said the above, it must also be noted that there is one possible route for legal action by the bank, even when 75% of creditors by value and 60% of the creditors by number, have agreed to a restructuring package of an existing debt. Please recall that according to Mint, “The bank initiated legal action against Kumar and five other directors after some cheques issued to it by Trident bounced. Trident was making repayments on Rs4 crore of loans to Kotak until January, after which it began defaulting.” (

So it is possible that the bank initiated action under the negotiable instruments act (NI Act). Here, “on the dishonour of a cheque, one can file a suit for recovery of the cheque amount along with the cost & interest under order XXXVII of Code of Civil Procedure 1908  and can also file a Criminal Complaint u/s 138 of Negotiable Instrument Act for punishment to the signatory of the cheque for haring committed an offence. However, before filing the said complaint, a statutory notice is liable to be given to the other party.”

Please recall from the earlier discussion that, as per the standstill clause under the CDR system, it would not be possible to file a civil suit if 75% of creditors by value and 60% of the creditors by number, had (in fact) agreed to a restructuring package of an existing debt. However, as also noted earlier, criminal action and associated proceedings are not prohibited. One wonders whether the said legal notice, given by Kotak Bank to Trident, is the statutory one under Section (138) of the NI Act.

If that is the case, then, the standstill clause becomes meaningless and would certainly have to be reviewed and suitably modified to protect debtors—who have committed to the CDR mechanism—against criminal action. I hope that the regulators and administrators of the CDR mechanism look into this aspect as well.

A final issue relates to information. According to the CDR Master Circular, “The company shall keep the lenders informed of any legal proceedings, the outcome of which would have a material impact on the debt servicing capability of the company. In consultation with the lenders, it shall take such remedial actions, as may be required in the best interest of the company and the lenders” (

 Here, it would be important to know whether Trident informed the other lenders of the happening as per the circular cited above.

All said and done, it seems very unusual that action has been taken against Trident, an MFI that has committed to the CDR mechanism and is in the process of having its debt restructured. With Kotak Bank saying that it is unable to share information because the matter is sub-judice, a lot of the questions remain unanswered. Hopefully, the RBI and the concerned administrators of the CDR system will get into the relevant issues identified above as soon as possible and bring an end to this very peculiar situation.

(The writer has over two decades of grassroots and institutional experience in rural finance, MSME development, agriculture and rural livelihood systems, rural/urban development and urban poverty alleviation/governance. He has worked extensively in Asia, Africa, North America and Europe with a wide range of stakeholders, from the private sector and academia to governments).




Ramesh S Arunachalam

5 years ago

Thanks Mr Balakrishnan for your perspective. I too agree that more often than not, CDR is abused and I have been the a very strong critic of lifestyles of MFI promoters and the governance of their compensation. a LO0T OF THE CRISIS IS related to that as well.

That said, then, the law has to plug the loopholes and that is why I want the RBI and/or CDR system to look at in this case and see what has enabled misuse (if any) in the present case!

And further more, let us also recognise that most commercial banks were a major part in causing the MF crisis. That is why many perhaps agreed to a CDR in the first place. I would not be surprised if there were huge conflicts of interest in banks funding MFIs the way they did - between Rs 300 - Rs 1000 crores were sometimes sanctioned and disbursed in no time and with no serious due diligence. Bankers knew that MFIs were involved in multiple, ghost and over lending and ghost lending exists in financial statements of many MFIs. So, banks are equally responsible and that is why many have agreed to a CDR plan.

So, I think that, this whole set of things must be probed and systemic loop holes must be plugged.

My larger point in the article was to raise various questions related to the above so that seeming inconsistencies and loop holes in the law are rooted out

Thanks again and I dont disagree with you but legal loopholes must be plugged!

R Balakrishnan

5 years ago

CDR is the most abused alphabets in India, by which wealth is transferred from the banks to promoters with dubious integrity. In the past, many corporates have built empires by using three alphabets called OTS. It involves grease, sleeze and wheeze. I support Kotak bank for having found a way to raise its voice.
I am sure that the promoter of the microfinance co has seen no diminution in his lifestyle or wealth. If anything it could have gone better.
CDR is a convenient escape route for promoters who try to escape personal liability for the problems they have caused wilfully, in their attempt to make personal money.

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