SEBI, which is preaching to world about corporate governance, has ignored investor complaints about GDR scam and blatant manipulation of Transgene Biotek shares. This is first part of a two-part series
Minority shareholders of Transgene Biotek Ltd have alleged misuse of global depository receipts (GDRs)—a financial instrument used to raise capital overseas, and several “well-timed” announcements by the company. According to these shareholders, Transgene used the structured GDR route to create equity shares without real net cash flow, converted it and then sold to gullible investors. After making several announcement to increase its share price, Transgene, then announced buy back and delisting of the company.
These investors have filed several complaints before market regulator Securities and Exchange Board of India (SEBI), but till date there is no action.
In September 2011, Transgene set up a subsidiary, Transgene Biotek Hong Kong Ltd to source strategic partnerships, acquisition and offering services to overseas customers. At that time, its price was around Rs30.50 per share. Next month, the company issued 25 lakh GDRs at $7 per GDR, worth $17.50 million. Transgene said this was done to meet its research and development (R&D), pre-clinical and clinical trials, new manufacturing facility, acquisition of technology and working capital requirements. The company soon transferred most of the money raised through GDR route, to its Hong Kong unit for buying technology. Whether the money was really paid to buy technology or refunded to ‘ghost’ GDR holders is still a big question. However, on 11 November 2011, Transgene share price moved to Rs55 per share, after the infusion of capital.
On 23rd November, the company announced sale of technology to TSS Export GmBH FZE worth $5 million that was expected to be completed over five-six months. However, there is no news on this front as well.
On 24 May 2012, Transgene announced ‘excellent’ results from its TrabiOral oral insulin studies. At that time, its share price was Rs26.50. Two months later, on 20th July, Transgene reiterated its ‘excellent’ study results while referring to unnamed customers and expected orders. At the same time it made a specific mention about its stock prices not keeping pace with its ‘development’.
On 16th August, Transgene announced good profit due to forex gains while talking about possible agreements with European pharmaceutical company for Tacrolimus, an immuno suppressant product and DHA, a healthcare supplement. By now, its shares had collapsed to Rs10.59.
Suddenly on 4 September 2012, Transgene board announced its decision to delist its shares. Three days later it announced delisting price of over Rs25 per share as against the prevailing price of only Rs10.36 per share.
Shareholders allege that the company had deliberately announced its delisting at a price 2.5 times more than its prevailing share prices for manipulation. After all, why will shareholders disapprove such a “generous” proposal?
The share prices of Transgene Biotek surged nearly 30% in just 17 trading sessions when the decision to consider delisting was announced for the first time on 27 August 2012. It made high of R14.20 on 17 September 2012 on appointing merchant bankers for its delisting process. This was a trap. The share price fell more than 65% to Rs4.91 in next two months, i.e. during 17 September 2012 to 19 November 2012. However, during the same period, the turnover of Transgene shares was huge. On 14 September 2012 its turnover stood at Rs25 crore. The stock price moved up to Rs14 from Rs10. At the same time its average volume also shots up due to several bulk deals. According to market sources, this helped the GDR holders to liquidate their position in the domestic market thus reduce their holdings.
Here are the questions raised by minority shareholders before SEBI…
1. Why was the Hong Kong subsidiary formed? What was its activity? Was it used as a conduit to transfer GDR money? What happened to the technology transfer of Rs86.50 crore which was 25% of the company’s balance sheet? Where are the accounts of this subsidiary and why are they not audited? The Auditor of Transgene has qualified the accounts on this matter.
2. Who are the GDR allottees? How are they related to the parties selling GDR converted shares through bulk deals?
3. What is the background of the FII - Stream Value Fund which invested in the company? Did they and the promoters have the wherewithal of making an open offer worth Rs175 crore? What was the understanding with this FII?
4. Were all the announcements including the advance indication of the buyback price of Rs25 meant to manipulate the market price?
5. What is the mystery behind postal ballots not being received by most of the shareholders across the country?
6. Was the postal ballot rigged to ensure that the "delisting" resolution is defeated?
SEBI has neither provided any answers to these questions nor initiated any action in the matter, according to the investors.
Tomorrow: Did promoters of Transgene used structured GDRs as an end game?
In an interim order, the HC asked property owners or tax-payers in Mumbai to go by the old regime and to pay 50% of the differential amount between the old and new rates
The Bombay High Court, while giving a relief to all property holders in Mumbai, has directed the city municipal corporation to accept taxes under the old un-amended rates with 50% differential between the old and new rates. In an interim order, the HC asked all property owners or tax-payers to go by the old regime and to pay 50% of the differential amount; up from 25% announced in the earlier interim order on 23rd December.
"We direct that the Municipal Corporation for Greater Mumbai (MCGM) shall accept the municipal taxes as per the above formula from other property owners, even if they have not filed any writ petition before this Court. However, such property owners shall pay taxes as per the above formula along with an undertaking to the Municipal Corporation that in case this Court negatives the challenge to the Constitutional validity of the Amendment Act, they will pay balance amount of tax and the interest on the balance amount at statutory rate within such time as may be granted by this Court," a bench of Chief Justice Mohit Shah and Justice MS Sanklecha said.
Under the new system, the tax is calculated on the basis of the capital value of a property, and the age of a building, its location and use are taken into account. Anomalies in computation and the hefty new taxes have caused serious concern for home and property owners. The new taxes also carry the threat of hefty penalties for non-payment. Experts contested the new "flawed" system could push up the tax by 300% or more.
Property tax under the old regime was calculated according to the rateable value of a building, based on the expected reasonable rent it could attract. Writ Petitions by Property Owners Association, The Foundation for Medical Research, the Indian Hotels Co and a huge bunch of almost 40 other pleas flooded the HC. They all challenged the new property tax structure "unconstitutional, exorbitant and confiscatory".
Moneylife Foundation has conducted several seminars and counselling sessions on the property tax issue affecting Mumbaikars, ever since the MCGM sent out demands for its hefty revised property taxes with arrears for the past three years.
To recap Moneylife’s efforts with regard to property tax, we had our first talk on the increased burden that the property tax has caused on the people of Mumbai on 9 February 2013 with Ashok Ravat, a noted civic activist and founder-convener of the Shivaji Park Advanced Locality Movement and Advocate Godfrey Pimenta, President of Sahar Citizens Forum and an ardent RTI activist. Click here for more on the session.
This was followed by repeated one-to-one and group counselling sessions by Mr Ravat who guided Moneylife Foundation members on how the capital value method is flawed as it uses the Ready Reckoner value, which is not supposed to indicate real value. This method proposed by the BMC, has ‘intentional’ errors. The new system, the capital-value-based tax system is totally flawed and hasn’t been accepted by any other municipal corporation, except the BMC
Lower courts will have to give explanation to the Chief Justice of the respective High Court if the trial is not completed within a year
The Supreme Court on Monday set a deadline for lower courts to complete trial in cases involving lawmakers within a year of framing of charges. This would expedite proceedings against sitting members of Parliament (MPs) and members of legislative assembly (MLAs) in criminal cases.
A bench headed by Justice RM Lodha also said that trial courts will have to give explanation to the Chief Justice of the respective High Court if the trial is not completed within a year.
The bench, however, said the period can be extended by the Chief Justice of the High Court if he is satisfied with the reason given by trial judge for not completing the trial within this period.
It said all such proceedings involving lawmakers must be conducted on a day-to-day basis in order to expedite the trial
As the trial is kept pending for years, lawmakers continue to enjoy membership of the legislative body despite being charged in a heinous offence, the court noted.
The court passed the order on a public interest litigation (PIL) filed by an NGO, Public Interest Foundation, seeking its direction for expeditious trial in cases involving lawmakers.
The NGO contended that MPs and MLAs continue to be Members of Parliament and Assembly for a long time due to delay in proceedings.