The shares of Emami Ltd’s newly spun-off realty arm have tanked massively on listing day, raising doubts about price manipulation amid lack of transparency.
Emami Infrastructure Ltd, the demerged realty arm of FMCG major Emami Ltd started trading on the national bourses on Wednesday and has already kicked up quite a storm in early trading hours.
The shares opened as high as Rs598.80 on the National Stock Exchange (NSE), only to come crashing down to Rs86.00 at the hour mark, translating into an astounding drop of 86%. The total traded volume stood at around 8.9 million shares on the NSE.
Meanwhile, on the Bombay Stock Exchange (BSE), Emami Infra opened at Rs250, hitting a high of Rs293 and then slipping to a low of Rs86. The total traded volume on the BSE stood at around 5.8 million shares. Finally, Emami Infra shares clsoed Wednesday at Rs101.7 on the BSE and at Rs103.7 on the NSE.
The wild fluctuations in the share price of Emami Infra and the gaping hole between the opening high price and day's low, within such a short span of time, raises a lot of suspicion. Certainly, a lot of manipulation is being carried out around this stock and begs some sort of regulatory intervention. The lack of transparency surrounding the company's listing and operations also raises a stink.
Most brokers were unaware of the situation and could not justify the wide price differential between the opening price at the two bourses or the wild gyrations in subsequent trading. Alok Churiwala, managing director, Churiwala Securities suggested that the only plausible explanation could be the time lag between the two stock exchanges. "NSE has a system of trading on co-located servers. It means that certain brokerages have their servers in the same facility as the NSE server. This enables them to trade within milliseconds, wherein hundreds and thousands of trades can take place. If one computer can do hundreds of trades in this time, imagine 10-15 computers doing it at the same time. By the time these prices reach the rest of the market, there could be a time lag. Possibly, by the time BSE could react to the prices, the ups and down would have already occurred at the NSE."
Commenting on the chances of price manipulation, Mr Churiwala said, "One can't infer that directly, but there could be some element of price manipulation. A movement like this is what gives rise to suspicion in minds of investors and is a fit vase for investigation."
Emami Infra is the outcome of a recent restructuring exercise by the parent company, Emami Ltd, wherein the group decided to bring its FMCG business under Emami Ltd and spin-off its realty business under a separate company.
Emami Realty, the erstwhile unlisted realty subsidiary of Emami, is now Emami Infrastructure. Zandu Pharmaceutical Works, which was renamed Zandu Realty following the restructuring, is now a listed real estate company and a subsidiary of Emami Infra.
The listing was done following shareholders' approval where one Emami Infrastructure share will be issued for every three Emami shares, while 14 Emami shares of Rs2 each will be issued for every one Zandu share of Rs100 apiece.