Five X is yet to be listed on the BSE after more than a year, leaving angry investors stranded
Shareholders in Octant Industries have been enduring an agonising wait, for more than a year, for listing of the demerged entity—Five X Finance and Investment (Five X).
For those unfamiliar with the dilemma, on 7 December 2010, Octant Industries, erstwhile Octant Interactive Technologies (OIT), had demerged its financial division business and vested 80% of its capital in this division known as Five X. The remaining 20% is vested with Octant Industries.
In other words, if an investor held Rs100 in OIT, Rs80 is vested in Five X while Rs20 will be held in Octant Industries. You can see that the bulk of the investors’ savings is held by Five X, which is yet to be listed on the Bombay Stock Exchange (BSE). 80% of the investors’ hard-earned money has been stuck for more than a year now. The peculiar thing is that Octant Industries, which got only 20% capital, successfully listed on 7 February 2011, just two months after the demerger announcement. Soon after being relisted in its new avatar, the stock hit a high of Rs28.90 and now is quoting at Rs10.49.
Initially, investors had to wait eight months for the Securities and Exchange Board of India (SEBI) to give its nod to go ahead with the Five X listing. Now they are waiting a further four months for BSE’s approval. One could safely assume that our regulators and institutions are holding investors at a ransom through unnecessary delays.
We first broke the story on 22 July 2011 (http://www.moneylife.in/article/post-de-merger-octant-interactive-shareholders-still-await-listing-of-spun-off-business/18317.html). After three months of this story, on 2 September 2011, SEBI had given its approval to go ahead with Five X listing. Now the ball is in BSE’s court to give the approval. We also had earlier written about BSE’s strange decision to list Octant Industries but not Five X (http://www.moneylife.in/article/bse-delays-five-x-listing-investors-capital-still-stuck-in-company/20811.html). Why is Five X taking longer than usual?
When we tried to dig some information about Girraj Kishor Agrawal, the director and signatory of Five X, we found out that he was director of the companies which were implicated for wrong-doings in the past. For instance, Mr Agrawal was the managing director of a company, Socrus Bio Sciences, which had flouted SEBI regulations for incorrectly reporting its shareholding pattern. SEBI had fined the company Rs1 lakh for the transgression without implicating its managing director. The order can be found here.
Additionally, Mr Agrawal is also involved in Banas Finance in the capacity as a director, which failed to comply with BSE listing agreement on 30 November 2007.
Interestingly, according to a recent filing with BSE, Octant Industries is planning a preferential issue for Rs13 crore, which is nearly 70% of its current equity capital. The company has planned to convene an Extraordinary General Meeting (EGM) to consider and pass this proposal on 9 February 2012, wherein the funds raised will be used for an “ongoing power project and to meet the financial institution requirements.”
The filing states:
“Octant Industries Ltd has informed BSE that the board of directors of the company at its meeting held on January 09, 2012, have considered and approved the proposal of Further Issue of Equity shares to the extent of Rupees Thirteen Crores on Preferential Issue basis in compliance with the provisions of SEBI (Issue of Capital & Disclosure Requirement) Regulations, 2009 and other related regulations. “
While Octant Industries is busy trying to raising capital at the behest of its owners, the very same shareholders are being quietly ignored while their hard-earned money is stuck with Five X. Is the management of Five X intentionally scuppering the chances of being listed? Being shareholders, is it not their right to know what is going on?
Despite repeated request to ask BSE for their views, we received no response at time of publishing this story.
Nifty may move in the range of 5,090 and 5,250
Institutional buying in blue-chips and support from the Asian region saw the market closing with gains for the third consecutive day. The rally was supported by a high volume of 83.56 crore shares on the National Stock Exchange (NSE). At the start of the session itself the Nifty crossed the resistance of 5,180, mentioned by us in the Wednesday’s closing report. From here we may see the rally continuing up to the level of 5,250. The Nifty may move between 5,090 and 5,250.
The market continued its positive trend, opening in the green on supportive cues from the Asian region. The Nifty opened 59 points up at 5,217 and the Sensex gained 124 points to resume trade at 17,201. Buying in index heavyweights supported early gains. The opening figure on the Nifty was its intraday high and the Sensex rose to 17,259 at its high.
The market was range-bound till the late morning session after which a sharp sell-off in realty and banking stocks pushed the market to the day’s lows. At the lows, the Nifty fell to 5,162 and the Sensex went back to 17,107.
A fall in the weekly food inflation numbers boosted the market in noon trade. Select buying by institutional investors helped the indices make a gradual upmove in post-noon trade. The market settled higher for the third day in a row. The Nifty gained 46 points to end the session at 5,205 and the Sensex surged 157 points to settle at 17,234.
The advance-decline ratio on the NSE was 929:508.
Among the broader indices, the BSE Mid-cap index closed 0.66% up and the BSE Small-cap index surged 1.30%.
The top sectoral gainers were BSE Oil & Gas (up 2.69%); BSE Consumer Durables (up 2.54%); BSE TECk (up 2.02%); BSE Metal (up 1.89%) and BSE Capital Goods (up 1.82%). BSE Realty (down 2.22%); BSE Fast Moving Consumer Goods (down 0.81%); BSE Bankex (down 0.37%) and BSE Power (down 0.25%) ended lower.
Sterlite Industries (up 5.49%); Tata Motors (up 4.10%); Larsen & Toubro (up 3.76%); Bharti Airtel (up 3.66%) and Reliance Industries (up 3.48%) were the top gainers on the Sensex. The losers were led by DLF (down 3.47%); Bajaj Auto (down 3.07%); BHEL (down 2.84%); Hero MotoCorp (down 2.21%) and Jindal Steel (down 2.04%).
The top performers on the Nifty were Sesa Goa (up 7.47%); SAIL (up 6.91%); Sterlite Industries (up 6.73%); Grasim (up 4.43%) and L&T (up 4.16%). The draggers of the index were Ranbaxy (down 6.82%); Punjab National Bank (down 3.59%); DLF (down 3.56%); Jaiprakash Associates (down 3.23%) and BHEL (down 3.19%).
Markets in Asia settled mostly higher as higher commodity prices supported gains in energy and metal stocks while on the flipside, the Japanese benchmark edged lower as a strengthening yen weighed on exporters. Investors are now focused on the US GDP data for the fourth quarter of 2011, due to be released later today.
The Hang Seng rose 0.31%; the Jakarta Composite added 0.07%; the Straits Times advanced 0.75% and the Seoul Composite gained 0.39%, On the other hand, the Nikkei 225 shed 0.09% and the KLSE Composite lost 0.19%. Markets China and Taiwan were shut for the Lunar New Year holidays. At the time of writing, two of the three key European markets were lower in trade while the US stock futures were in the green.
Back home, foreign institutional investors were net buyers of shares totalling Rs1,147.01 crore on Wednesday while domestic institutional investors were net sellers of shares amounting to Rs712 crore.
In one of the biggest announcements related to job creation at the World Economic Forum, Indian IT major HCL Technologies today said the company will create 10,000 local jobs in Europe and the US over the next five years.
The announcement came a day after German Chancellor Angela Merkel said that Europe would work toward becoming a benchmark investment destination on the global arena, but she would want foreign companies coming there to create jobs as well. HCL Tech gained 1.54% to close at Rs427.30 on the NSE.
Surana Ventures has announced the completion of its module manufacturing unit in the Fab City, 40 km from Hyderabad, close to the new international airport and also the commissioning of a 5 MW solar photovoltaic unit in Gujarat. The stock declined 2.63% to close at Rs18.50 on the NSE.
Essar Oil has commenced the production of viscosity grade bitumen from its Vadinar Refinery. Viscosity grade bitumen conforms to the BIS standard IS 73:2006, which has been widely adopted by the Ministry of Road Transport and highways, National Highway Authority of India, Directorate General of Supplies and Disposal and all government Public Work Departments (PWDs). The stock lost 0.32% to close at Rs62.20 on the NSE.
For the purpose of crackdown of these MLMs, the Rajasthan police have formed a Special Operation Group headed by the Additional Director General (ADG) of Police. This is something like Economic Offences Wing (EOW) of the Andhra Pradesh police
Following the ongoing probe in the multi level marketing firm, Right Concept Marketing (RCM), in Bhilwara district of Rajasthan, the police have registered 24 cases against 10 different ponzi schemes. Moneylife had recently reported that Rajasthan police are probing more MLM frauds after cracking RCM and Gold Sukh. (http://www.moneylife.in/article/rajasthan-police-probing-more-mlm-frauds-after-cracking-rcm-and-gold-sukh/23021.html)
According to the sources, many such MLM companies promising high returns and investment in gold are been investigated. “We came across MLMs promising high returns while investigating RCM. These companies, apart from luring people with schemes which double their money, are promising investment in livestock such as goats. Star Net is one among the 10 companies against whom we have registered complaints,” said an officer close to investigation, preferring anonymity. He adds, “Altogether we have registered 24 complaints. Many of them also have close links with politicians.”
For the purpose of crackdown of these MLMs, sources say, the police have formed a Special Operation Group headed by the Additional Director General (ADG) of Police. This is something like Economic Offences Wing (EOW) of the Andhra Pradesh police.
Meanwhile, according to the sources, there is a possibility of more arrests in the RCM fraud. Further, eight more cases have been registered against it in various districts of Rajasthan including Jalor, Jaipur, etc. “Recently the Rajasthan High Court rejected the bail application as well as the request to quash the FIR by the four arrested officers of RCM,” says the officer.
According to police estimates, the RCM fraud is in the tune of Rs2,000 crore. The business model of RCM, was based on networking where it invited people to become members on the payment of Rs1,500. To avail 10% commission they were asked to recruit more people in the scheme. The company is not registered under the Companies Act.
An officer close to investigation told Moneylife that the bank accounts of the company have been frozen. “The recovery of money will still require time. We are co-ordinating with various central government authorities like Income Tax department.”
In November, last year, ponzi scheme Gold Sukh made headlines after it allegedly duped 1.75 lakh investors of more than Rs300 crore. Gold Sukh promised returns 27 times than the investment in just 15 months and was able to lure many politicians, police officers and businessmen.