Price-rigging rages on in the IPO market

BS TransComm which found no takers at Rs260, got listed today and ended the day at Rs381!

Strange games are being played at ease in the Initial Public Offering (IPO) market even as the market regulator and the stock exchanges look on. BS TransComm got listed today. It had failed to receive even one-time subscription initially. The price band was reduced and time extended.

Finally the issue barely managed 1.1 times subscription in the extended period. But even as the Sensex tanked on the day of listing, (down 216 points) the stock was almost up 60%!

Isn't it strange that when there were no buyers at Rs260 (issue price), suddenly there will emerge a host of buyers at Rs370-Rs380? The stock closed today at Rs381 on the BSE. According to a market observer, "This is a classic case of price rigging, circular trading and structural deals." He added, "The real fun starts from tomorrow, when the operators start offloading."

The source points out that the same pattern was seen in Bedmutha, Aster Silicate, Sea TV and Tirupati Inks. "All these companies had a similar debut and now there are no takers at lower levels and absolutely no volumes."

Today, two other companies got listed, both at a significant premium, braving the falling market. Prestige Estates, the Bangalore-based builder, had issued shares at Rs183 and ended the day at Rs192.55, up 5.2% even though it was barely oversubscribed by 2.26 times. Gyscoal Alloys, which issued shares at Rs71, ended at Rs81.55, up 15.86%. Gyscoal and BS TransComm both got a grading of 2/5 while Prestige got a grading of 3/5.



k a prasanna

6 years ago

This article had the telling effect on the shares. BS Transcomm trading below the offer price.


6 years ago

Apart from IPOs Operators pick up small stocks and force the price to move in the direction they desire. A case of exampled is
Avon Corporation which is trading at PE of only 1.33 times. The company has shown good results for June and Sept quarters. Co. paid dividend of 30 paise per share in Oct.2010. The 6 month EPS is Rs.2.11 and annualised could be more than Rs.4.00 . CMP is Rs.5.35. Daily there is bulk trade with almost equal amount of shares in bulk buy and bulk sell.


6 years ago

when big boss is at one's side then why will he worry. Sebi is full of malpractice, corruption, they r more worried for coal india ipo and it(BS) will go scot free. due to such acts of sebi and other govt dept..india is ranked 87 in corruption table....keep it up sebi ...make india, its daku politicians and fm happy , let hopeless investor burn its fingures/hand


6 years ago

I would like you to inform SEBI that since we have a price discovery of the stock by bidding for the same, then on the first day of listing why again go thru a price discovery. I think the should be a price band of not more than 10 % for small medium stocks or trade for trade with no circuit filter.


6 years ago

I think the Stock Market is the biggest gambling den. And since the rich play this market it has a halo of pseudo-respectabilty.

Considering this, the government should legalise all forms of gambling right from the lowly Matka to the sophisticated betting in cricket; and by extension all types of corruption, match fixing etc.

This will at least make the government and the people of this country look honest and upright.

Krupal K G

6 years ago

Out of 2.29 crore shares traded on BSE about 4 firms account for 1.64 crore share day trading and another 10 firms day trade in lakhs. It is rampant speculation to trap innocent investors who are fond of volumes. This is high time SEBI should bring new shares into TRADE TO TRADE segment for few months to arrive at fair value of a share. In recent days few trading firms trade heavy volumes on day trading basis on unnatural thin margins and registers heavy volumes in majority of new listings.

k a prasanna

6 years ago

What is the market watch dog is doing?
Bedmutha which saw a volume of 10cr shares on the listing day, is down to 10000 shares a day. The scrip has hit the lower circuit for the fifth consecutive day. SEBI should also look into the market intermediaries associated with the issue.

Wednesday Closing Report: Hanging there by the skin of its teeth

The Indian market ended with a cut of over a percent, tracking lacklustre global cues. Choppy trade along with broadbased selling sent the indices on a southward journey, but the ending was a tad above the crucial levels and above the day's lows.

The market opened weak on unsupportive global cues. Selling in key heavyweights and nervousness ahead of the futures and options (F&O) expiry, kept the market in the negative terrain. The losses increased as the day progressed, plunging the indices deeper into the red following a dismal opening at the European bourses. However, the indices settled a little above the psychological levels.

The Sensex ended at 20,005, down 216.02 points (1.07%), marginally above the 20,000-mark. The index touched a high of 20,220 and a low of 19,923, mid-session. The Nifty declined 75 points (1.23%) to end at 6,007, slightly above the crucial level of 6,000. The benchmark touched a high of 6,076 and a low of 5,987 in trade today.

The overall market breadth was dismal. The Sensex closed with 22 losers, seven advancing stocks and one returning unchanged. The Nifty ended with 41 in the declining list against nine stocks in the green. Among the broader indices, the BSE Mid-cap index lost 0.29% while the BSE Small-cap index fell 0.31%.

The Sensex gainers included Reliance Communications (RCom) (up 3.66%), Mahindra & Mahindra (M&M) (1.63%) and Tata Steel (up 1.48%). The losers were NTPC (down 3.14%), HDFC (down 2.59%) and Maruti Suzuki (down 2.44%).

The sectoral space had only two gainers - BSE Consumer Durables (up 0.44%) and BSE Metal (up 0.28%). The losers were led by BSE Realty (down 2.07%), BSE Fast Moving Consumer Goods (FMCG) (down 1.61%), BSE Bankex (down 1.19%), BSE TECk and BSE IT (down 1.04% each).

Asian markets ended lower on concerns that the US Federal Reserve's quantitative easing, to be announced next week, might not be as large as thought. The worries led to a rebound in the dollar, impacting commodity stocks in the region.

The Shanghai Composite tanked 1.46%, Hang Seng tumbled 1.85%, Jakarta Composite was down 0.81%, Straits Times shed 1.21%, Seoul Composite was down 0.51% and Taiwan Weighted sank 0.63%. On the other hand, KLSE Composite gained 0.14% and Nikkei 225 added 0.10% in trade today.

The government is not considering freeing diesel prices yet, as the move will lead to rise in retail rates that will push up the already high inflation rate, oil secretary S Sundareshan said today.

"Diesel price deregulation will mean an increase in prices, which is not fair (under present circumstances)," he said at the Economic Editors Conference here.

 The US markets ended flat on Tuesday as the dollar regained its strength on concerns about the quantum of stimulus that the Federal Reserve will announce in its two-day meeting next week. Investors ignored the higher-than-expected consumer confidence index but pondered over weak earnings reports. The Federal Housing Finance Agency said in a separate report that home prices climbed 0.4% in August, beating analysts' forecasts.

The Dow rose 5.41 points (0.05%) to 11,169. The S&P 500 added 0.02 points to 1,185. The Nasdaq surged 6.44 points (0.26%) to 2,497.

Foreign institutional investors were net buyers of Rs481 crore in the equities segment on Tuesday. Domestic institutional investors offloaded stocks worth Rs708 crore on the same day.

State-owned exploration and production (E&P) major Oil and Natural Gas Corporation (ONGC) (down 1.80%) today said it has appointed two international auditors to certify its oil and gas reserves, ahead of a planned share sale early next year. The government plans to sell 5% of its shares in the follow-on public offer (FPO) in March 2011.

"We have appointed D&M (DeGolyer and MacNaughton) and Gaffney, Cline and Associates as reserve auditors to value our reserves," ONGC chairman and managing director RS Sharma told reporters in New Delhi.

Biotechnology major Biocon (down 0.29%) has announced a strategic foreign direct investment (FDI) in Malaysia with Malaysian Biotechnology Corporation Sdn Bhd (BiotechCorp). The investment will be made towards establishing a bio-manufacturing and R&D facility in Bio-Xcell, a custom-built biotechnology park and ecosystem in Malaysia.

The project would focus on research, development and production of high-end biosimilars and other biopharmaceuticals products.

Tata Steel (up 1.48%) has said that its Rs 15,000-crore new production line at its Jamshedpur plant will go on stream by July-September 2011, increasing the total annual capacity to 10 million tonnes.

The global steel major is enhancing the production capacity from 6.8 MTPA to 10 MTPA, with an investment of Rs 15,000 crore.

The expansion is part of the steel major's plans to take its annual capacity to 16MT by 2014 at an investment of around Rs40,000 crore. The projects will be funded by a mix of debt and internal accruals.


Star Union Dai-ichi: Will it be the dark horse in the insurance race?

The insurer has been making quiet inroads in the life insurance sector with innovative products, a low-cost operation, focused management and strong support of the bancassurance channel. It also has an insurance veteran at the helm

Kamalji Sahay is not your usual flashy insurance honcho. The CEO of Star Union Dai-ichi has spent long years learning the ropes of the business in Life Insurance Corporation, going on to set up LIC's operation in Nepal.

His mantra for Star Union Dai-ichi has been efficiency in managing costs through which he is targeting an ambitious break-even level within five years. The corporate office is located in Vashi, Navi Mumbai, to keep costs under control. According to some insiders, even costs incurred by the foreign partner Dai-ichi were either trimmed or passed to the parent company's books. This is in sharp contrast to the huge overheads that other insurance companies have with their foreign partners.

According to industry sources, apart from the nuts and bolts of the business, Mr Sahay knows customer needs very well too. Years ago, when he was posted in Haora, West Bengal, a person who had worked with LIC came to meet him. "He wanted to buy insurance at 65 because he wanted to ensure that his cremation expenses were paid by the insurance company," recounted Mr Sahay. "He did not want to be a burden on any family member. Dying is the ultimate truth and one needs to exit with dignity and not leaving liabilities to family members."

Such insights shape Mr Sahay's approach to insurance and the kind of products Star Dai-ichi should be launching. According to him, "A person should be able to pass by Star Union Dai-ichi's office and believe that this insurance company will properly pay the insurance amount to his family in case anything untoward happens to him."

Star Union Dai-ichi has been making quiet inroads in the life insurance sector with innovative products, a low-cost operation, focused management and strong support of the bancassurance channel, since its launch a couple of years ago. According to Mr Sahay, "The cost of operations for the half-year has been just 64% of the premium collection, whereas this is much higher in the case of insurance companies which depend on their own channels. (Our) partnership with Union Bank and Bank of India has helped in this regard."

Bancassurance also gives access to the customer database of various banks, which is a major impetus.
Among its innovative products are its Reverse Mortgage Loan Annuity Plan, Defined Benefit Endowment Plan, a unique micro-term insurance plan (which provides insurance cover to weaker and backward sections of society at a low cost), group gratuity schemes, group leave encashment schemes and group life insurance term plans which cater to the needs of education loan borrowers.

The company also has a pan-India footprint. Mr Sahay says he can do "very good business" in some of the backward areas in north India and in cities and towns like Gorakhpur, Varanasi, Dhanbad, Bokaro and Ranchi. "We have been able to make determined forays into rural areas because of the bancassurance model benefiting from bank branches in these areas," he told Moneylife.

Star Union is the only provider today of the Reverse Mortgage Loan-Annuity Plan, which aims to provide financial security to senior citizens aged 60 years and above. According to Mr Sahay, "Reverse mortgage is an innovative product specially suited to Indian cultural values and ethos. The Sud Life Reverse Mortgage Loan-Annuity Plan aims to provide financial security to senior citizens who have assets but not enough liquidity to lead a life with dignity."

Senior citizens can approach Central Bank of India, which is the partner bank of Star Union Dai-ichi Life Insurance Co Ltd, to avail a reverse mortgage loan against their existing property. The bank will act as a master policyholder for the property and buy the citizens a group annuity from Star Union Dai-ichi Life Insurance. Senior citizens do not have to repay this loan and in case the legal heirs wish to retain the property they need to repay the loan amount to the bank with the accrued interest on it. This plan is also helpful for retired professionals, as they can lead their lives respectfully even after retirement.

There are two options to receive the annuity. Through the first option, senior citizens can receive the stated annuity throughout their lifetime and the amount will cease thereafter. Through the second option, senior citizens will receive comparatively lower annuity, which will be adequately compensated for by the return of the original purchase price to their legal heirs thereafter.
Bank of India and Union Bank of India, two leading public sector banks in India and the Dai-ichi Mutual Life Insurance Company, a leading Japanese company in the life insurance market, have floated the Star Union Dai-ichi Life Insurance Co Ltd for life insurance business in India.


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