The sudden spurt in the stock price will be an opportunity for investors who have been stuck with the shares
The market regulator, the Securities and Exchange Board of India (SEBI), on Thursday barred PS Saminathan, managing director of Pyramid Saimira Theatre Ltd (PSTL), from the markets and restrained him from becoming a director in any listed company for 10 years. Today, within hours of the SEBI announcement, the stock price of Pyramid Saimira zoomed to hit an upper circuit.
On Friday, Pyramid Saimira shares closed 19.94% higher at Rs7.46, while the benchmark Sensex ended the day up 0.5% at 20,073 points. The company's shares hit a 52-week low of Rs5.10 on 30th November and a high of Rs24.85 on 12th January.
The surprising element in trading today was that there were 2,23,363 buy orders pending with no sellers available. The Pyramid Saimira shares hitting the upper circuit is a boon for public shareholders who have been stuck with the shares for a long time now.
In its order yesterday, SEBI asked Mr Saminathan to make an open offer through a merchant banker to buy the company's shares from the public, through a public offer, by paying them the value determined by the valuer, within a period of three months.
SEBI said, "The fictitious entries in the books of accounts with a view to paint a rosy picture about the financial health of the company (Pyramid Saimira), disclosure of the inflated financial position and false corporate announcements mislead the investing public and constitute the worst kind of fraud on the part of the company, management and promoters. The issue of share warrants to promoters without receiving the consideration constitutes the worst kind of breach of trust of the investors."
SEBI had conducted an investigation into alleged fraudulent and unfair trade practices by Pyramid Saimira, its management and promoters. Surprisingly, the company levelled counter-allegations against the regulator, saying that it had no authority to probe its accounts.
In this regard, MS Sahoo, whole-time member of SEBI, said, "As regards inflated profits and revenues, the noticees (Pyramid Saimira) have stated that SEBI is not an expert body on accounts and the investigation into accounts of PSTL cannot be conducted by students of political science who are working with SEBI, but by an independent audit firm. SEBI's refusal to go ahead with audit by an independent audit firm indicates its bias against the noticees. Since the show-cause notice (SCN) is based on investigation of accounts of PSTL by SEBI, the noticees would not respond to the allegations in the SCN and would not provide the relevant records to the investigation authority. They have, however, stated that it is the prerogative of PSTL to maintain accounting records in a manner fit to the business exigencies and SEBI has no power to draw any inference in this regard. I find that the noticees wish to dictate how a statutory authority, which is authorised under the law to conduct investigations, would conduct investigation. Unfortunately, this privilege is not available to the noticees under the law. Refusal to conduct investigation in the way the noticees desire in no way indicates bias on the part of a statutory authority. Besides the allegations about competence of SEBI officials to investigate into affairs of a company is not in good taste."
In November 2009, the market regulator had directed Pyramid Saimira to restrain from dealings in the securities market for seven years, after the company was found guilty of allowing five persons to illegally corner shares from the initial public offering that had been reserved for employees of the company.
Appeals by the company against the order were dismissed by the Securities Appellate Tribunal (SAT) and the Supreme Court in orders on 7th April and 16th July, respectively. In addition, the Madras High Court, in September, appointed a provisional liquidator in the winding up petition filed by Patni Financial Advisors, one of the many creditors of the theatre chain, film production and exhibition company.
What happens to investors?
New Delhi: The government has exuded confidence that economic growth in the current and the next quarter will be as encouraging as 8.9% recorded in the previous two quarters, but said India must tackle barriers to ensure double-digit level growth, reports PTI.
"It is expected the...two quarters would be as encouraging, if not better... we assume that we will be able to reach 8.5%-8.7% of gross domestic product (GDP) growth this year and perhaps next year will be able to reach a higher level," finance minister Pranab Mukherjee said at the annual general meeting of the PHD Chamber.
However, the country will have to tackle host of national and international problems to register double-digit growth on a sustainable basis, he said.
"It (double digit growth) must be on a sustainable basis and for that we shall have to ensure that the challenges that we are facing today, one on the price front, another on fiscal consolidation and third certain developments which are taking place (internationally)," he said.
The Indian economy grew by 8.9% in the first two quarters this fiscal. The government's Mid-Year Analysis projects the economy to grow by up to over 9% this fiscal.
If this happens, Indian economy would expand at a pace registered three years before the global financial crisis hit the economy in 2008.
While India is charting a high growth path, Mr Mukherjee said there are "many barriers" which need to be crossed for achieving a sustainable double-digit GDP growth.
While the government is desperately trying to bring down rates of essential food items, the wholesale price based inflation for November was about 7.5%.
The recent spurt in onion prices has catapulted food inflation to double-digits level during the week ended 11th December. Besides, international oil prices could further push up the inflation.
The finance minister said the Reserve Bank of India's (RBI) decision to inject Rs48,000 crore into the system without hiking policy rates shows that the central bank is not only fully aware of the inflationary pressures but also mindful of the requirements for higher growth.
Mr Mukherjee exuded confidence that the government's fiscal policy and RBI's monetary actions are in tandem and will help the economy recover and achieve higher growth trajectory.
The RBI has decided to inject Rs48,000 crore into the system by buying government securities through open market operations, as the system faces cash crunch due to high credit needs and advance tax payments. Top 100 companies paid over Rs25,000 crore of advance tax in the third quarter of this fiscal.
New Delhi: Cash crunch in the system, coupled with high inflation, will keep interest rates at higher levels in 2011, reports PTI quoting the Associated Chambers of Commerce and Industry (Assocham).
With inflation likely to rise further, the Reserve Bank of India (RBI) may go in for another hike in the key policy rates in its fourth quarterly review, slated to be announced on 25th January.
Inflationary pressures are building up with commodity prices shooting up the world over as well as crude touching $90 per barrel, the chamber said.
High inflation would put pressure on the RBI to go in for tighter monetary policy-hiking rates at which it lends to and borrows from other banks-which, in turn, helps curbing consumer spending and taming the rate of price rise.
Inflation continues to be much higher than the tolerance level of 5.5% per annum, as projected for the end of the current fiscal.
Both, food as well as overall inflation have been much higher than this level for most of this year.
Food inflation surged back into the double-digit territory at 12.13% for the week ended 11th December as the prices of vegetables, particularly onions, rose for the third consecutive week.
Meanwhile, although overall inflation for November was at 7.48%, down from 8.58% in the previous month there are concerns that it may rise again.
"The days ahead are extremely dicey...The options with RBI are limited as the growth is not likely to be sacrificed for inflation. Hence there is every likelihood of policy rates to inch up in the next monitory policy," Assocham president Dilip Modi said.
The chamber also said that faster credit growth has put pressure on the liquidity and the crunch is likely to remain in 2011 because high inflation has dissuaded investors to park funds with banks, as reflected in low deposit growth.
RBI has partially blamed the sluggish growth in bank deposits for aggravating the shortage in money supply. This could partly be attributed to negative returns these deposits fetch for people, compared to inflation rate.
However, it said that the recent mid-quarter monetary policy of the RBI has supported the liquidity market which would sustain growth in credit offtake.