SEBI imposes Rs14 crore penalty on two IPO scam financiers

The two had been accused of making unlawful gains of over Rs4.94 crore by cornering shares of various companies meant for retail individual investors and the penalty is three times of the amount

Mumbai: Market regulator Securities and Exchange Board of India (SEBI) on Friday imposed a penalty of Rs14 crore on Dushyant Natwarlal Dalal and Puloma Dushyant Dalal, the two financiers for unlawful gains made during the infamous initial public offer (IPO) scam of 2003-05, reports PTI.

The two had been accused of making unlawful gains of over Rs4.94 crore by cornering shares of various companies meant for retail individual investors and the penalty is three times of the amount.

“...considering all the said facts, it is felt that a consolidated penalty of Rs14 crore on the noticees (Dushyant Natwarlal Dalal and Puloma Dushyant Dalal), which is approximately three times of the unlawful gains made by them, shall be commensurate with the violations committed by them,” SEBI said in an order.

The two have been directed to pay up the penalty within 45 days either jointly or individually.

The Dalals had been charged with being financiers to two key operators—Sugandh Estates and Investments Pvt Ltd and Purshottam Budhwani.

The key operators had allegedly opened large number of demat accounts in the name of non-existent persons or name lenders and acquired shares of various companies by making applications in fictitious names.

The key operators subsequently transferred these shares through off-market deals to ultimate beneficiaries who had acted as financiers.

The Dalals were charged with being parties to such unlawful act of cornering shares and acting in connivance with others to make unlawful gains at the cost of other individual investors.

IPOs of major firms like IL&FS, IDFC, FSC Software Solutions, Gateway Distriparks, Provogue, MSP Steel, Nectar Lifesciences, Shoppers Stop and Suzlon were targeted by the two key operators the Dalals had connived with.

SEBI said: “... the noticees provided an aggregate of about Rs85 crore towards subscription of these IPOs without any security and documentation. They received back the money in cash or in kind (i.e. by way of shares).”

It said that the manner and movement of shares and funds transferred clearly indicate that the transactions were not “normal lending”.

“...there is no doubt that the noticees cornered the shares meant for retail and individual investors and in the process, deprived them of their rightful allotments in the said IPOs,” SEBI said.

“The facts and circumstances of the case... do confirm that the noticees acted in collusion with others in cornering shares meant for retail investors and made unlawful gains to the tune of Rs4,94,19,379...,” it added.

The IPO scam of 2003-05 refers to cornering of shares by some brokers reserved for retail investors in the public issues of certain public offers, including IL&FS, TCS, Yes Bank, Shoppers Stop, through fictitious multiple demat accounts.

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COMMENTS

Prakash

6 years ago

Finally it seems justice prevails. Though what is exposed maybe just a part of what they may be doing since many years.

Weak upmove possible: Weekly Market Report

Support at 5,435, look out for 5,620 on the Nifty

A slew of positive economic indicators helped the market end the week with a gain of 1%. A rise in exports, the growth in six core sector industries in April and easing of food inflation for the week ended 21st May, supported the gains.

On the first trading day of the week, the market closed flat with a negative bias, weighed down by weak corporate results. Ignoring the marginally slower GDP growth for the last fiscal, the market continued its uptrend and closed higher on Tuesday. It expanded its gains on Wednesday on positive economic indicators. The rally lost steam and closed lower on the last two days. Overall, the Sensex settled 110 points higher at 18,376 and the Nifty added 41 points to close the week at 5,517.

The top Sensex gainers in the week were Reliance Communications (up 10%), Hindustan Unilever (up 5%), Larsen & Toubro, Bajaj Auto and DLF (up 4% each). Tata Motors (down 6%) was the biggest loser in the list that included Mahindra & Mahindra (down 5%), Hindalco Industries (down 4%), Tata Steel and ICICI Bank (down 2% each).

On Friday, Reliance Industries, the country's biggest company by market value, registered its biggest decline in almost three weeks, after the chairman failed to give a date by when the company would be able to increase natural gas production.

Among the sectors, the BSE Consumer Durables index gained 4% and BSE Fast Moving Consumer Goods index rose 3%, but BSE Auto lost 2% and BSE Oil & Gas shed 1%.

Overall, the uptrend in the market is still continuing with the resistance on the Nifty at 5,620. However, if the market falls in the near future, the first support lies at 5,435.

The country's gross domestic product (GDP) grew at 8.5% in the fiscal year ended March 2011, better than the 8% in the previous year. However, the growth figure for the January-March 2011 period of 7.8% caused some worry due to a slowdown in manufacturing.

The government has lowered its economic growth expectations for FY11-12 to around 8.75% from the earlier 9%. Nevertheless, it has said it is hopeful of meeting the fiscal target of 4.6% for the current year.

Food inflation rose 8.06% in the week ended 21st May, lower from 8.55% a week ago. The primary articles price index was up 10.87%, compared with an annual rise of 11.60% a week earlier. However the fuel price index climbed 12.54%, compared with a rise of 12.11% in the week before.

The growth of six core infrastructure industries-crude oil, petroleum refinery products, coal, electricity, cement and finished steel-fell to 5.2% in April 2011 from 7.5% in the year-ago period. The slowdown comes after the six core infrastructure industries grew by 7.4% in March 2011. During the 2010-11 fiscal, these core sectors had expanded by 5.9%, as against 5.5% in the previous year.

The country's exports grew by 34.4% on an annual basis to $23.8 billion in the first month of the 2011-12 fiscal, maintaining the growth momentum of the previous year. Imports were up by 14.1% at $32.8 billion in April, year-on-year, leaving a trade deficit of $8.9 billion.

For the entire fiscal 2010-11, merchandise exports aggregated $246 billion, a growth of 37.55% while imports stood at $350 billion, down by 21.6%, resulting in a trade deficit of $104 billion.

On the global front, non-farm payrolls in the US increased by 54,000 in May, the weakest reading since September, while the unemployment rate rose to 9.1% in the month under review.

The India Meteorological Department on Friday said that the monsoon has further advanced over some more parts of the central Arabian Sea, Karnataka, Andhra Pradesh and the Bay of Bengal and entire Goa. This will be a relief for the agriculture sector and policymakers.

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Uptrend in share prices to continue: Friday Closing Report

RIL hinders upmove; Nifty resistance at 5,620

The domestic market which opened strong in the morning pared all its gains in noon trade after the Reliance Industries' (RIL) annual general meeting. Oil & gas, banking and realty stocks witnessed good demand in early trade. But the lacklustre RIL meeting pulled the market lower in noon trade. HDFC and Tata Motors were among the other blue-chip losers.

The Sensex opened at 18,554, up 60 points from it previous close, and the Nifty opened 15 points higher at 5,566. The market soon touched its intra-day high with the Sensex hitting 18,673 and the Nifty touching 5,605. The market continued to trade range-bound in the absence of any major triggers. The key benchmarks turned negative in noon trade, as investors who were hoping that RIL would answer some of the many questions about its business prospects, were disappointed that chairman Mukesh Ambani said nothing about specific plans for the current fiscal.

Reliance Industries, the country's biggest company by market value, declined the most in almost three weeks after the chairman failed to indicate when the company would increase natural gas production.

The market continued to trade in negative territory in post-noon trade and touched its intra-day low in the late session. The Sensex touched its low at 18,346 and the Nifty dropped to 5,507. By the end of trade the Sensex pulled back a little to 18,376, still 118 points down, and the Nifty was still down 34 points at 5,517.

The Nifty was able to keep itself above 5,550 during trade, indicating its resistance to a fall. However the company-specific event saw the market slip during its upward journey. The uptrend is continuing with the resistance at 5,620. However if the market falls in the near future, the first support is at 5,435.

The advance-decline ratio on the National Stock Exchange was 590:806.

Among the broader indices, the BSE Mid-cap index was down 0.34% and the BSE Small-cap index shed 0.05%.

The lacklustre RIL AGM had its effect on the BSE Oil & Gas sector, which ended as the top sectoral loser (down 1.34%). Other sectoral losers were BSE Metal (down 1.05%), BSE PSU (down 1.03%), BSE Healthcare (down 0.94%) and BSE FMCG (down 0.77%). The only gainers were BSE Capital Goods (up 0.75%) and BSE Consumer Durables (up 0.46%).

Reliance Communications (up 3.95%), Larsen &Toubro (up 2.18%) and Mahindra & Mahindra (up 0.96%) were the top gainers among the Sensex stocks. HDFC (down 2.99%), Hindalco Industries (down 2.55%), Jaiprakash Associates (down 2.36%), Tata Motors (down 2.29%) and RIL (down 1.65%) were the major losers.

Markets in Asia settled mixed on signs of a slowdown in the US economy. The Japanese market was down on worries that a contraction in the global economy would impact export-oriented companies. The Seoul Composite index ended flat as gains in the shipbuilding sector helped curb the fall.

The Shanghai Composite surged 0.85%, the Jakarta Composite rose 0.16%, the KLSE Composite added 0.12% and the Taiwan Weighted climbed 0.61%. On the other hand, the Hang Seng tanked 1.31%, the Nikkei 225 slipped 0.66%, the Straits Times was down 0.47% and the Seoul Composite lost 0.03%.

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