The stock of Vikas WSP which is up 291%, since 1 January 2012, is suspicious and needs to be investigated. But possibly it has not even registered in SEBI’s vaunted surveillance system

Vikas WSP, a guar gum powder manufacturer, which had been indicted and censured in the past for several irregularities including window dressing, failing to address investor complaints and failure to pay dividends, has been constantly hitting the upper circuit several times and the stock is up 311% since 1 January 2012, from Rs18.05 to Rs70.60 . Apparently, it seems that its promoter—Bajrang Dass Aggarwal—has been buying shares from the open market. According to the filing in Bombay Stock Exchange (BSE), it said, “Vikas WSP Ltd has informed BSE that in the meeting of the board of directors of the company held on 10 April 2012, BD Aggarwal, one of the promoter of the company informed to the board that he will increase promoters holding more than 20% as soon as possible which is as on date 17.50%.”

This isn’t the first time the “bull-run” the company has seen. The current spurt in price is reminiscent of the one that happened in 2000, when the company went from Rs367 all the way up to Rs1,151, a whopping 219% move in a matter of 17 days before tanking 57% to Rs490 in the next 19 days.

Vikas WSP has had a history of shady practices in the past. It was delisted for suspected malpractices. An Economic Times article that appeared in 2000 exposed window-dressing practices in the form of abnormally high margins and wrong export turnover of Rs233 crore. In the light of this finding, the government vide petition - CP No. 51/2003 under Section 397/398 read with Section 408 of the Companies Act against the company—sought to install three central government directors on the company’s board. Judge KC Ganjwal accepted the plea and remarked; “the company has filed disputing figures of production with different agencies. Undoubtedly, the affairs of the company are not transparent and doubts have been created in the minds of shareholders and public at large. In order to effectively safeguard the interest of the company as also of shareholders and the public at large, I accept the plea of the central government that some check and transparency needs to be restored in the board of directors. Accordingly, I allow the second Company Petition NO.51/2003 filed under Sections 397/398 and 408 of the Companies Act, 1956 and direct the central government to appoint not more than three directors on the board of directors of the respondent company for a maximum period of three years from the date they assume office.”

What is more pertinent is that, according to their December 2011 BSE filing, the promoters have encumbered all of their shareholding. More interestingly, Goldman Sachs has a stake in the company vis-a-vis its Mauritius Special Purpose Vehicle (SPV), bought back in 2010. According to BSE, Goldman Sachs Investments (Mauritius) I Ltd holds 5,739,400 shares, or 4.18% of the company. It is quite likely that Goldman is merely acting as a front for someone, possibly a market manipulator. The Securities and Exchange Board of India (SEBI) is not interested in piercing through the details of the FII sub-accounts.

It has been 12 years since the Economic Times expose and the first “bull-run”. The regulators had taken action against the company by delisting it. However, the company got relisted in 2007. It is interesting to note that the announcement by the promoter to buy shares from the open market comes when NCDEX had barred guar seed and guar gum futures from the markets. Apparently, even guar prices had shot up sharply, prompting NCDEX officials to take note and shut it down.

NCDEX vide circular NCDEX/TRADING-030/2012/101, cited;  “Trading and clearing members are hereby informed that in terms of the Bye-laws, Rules and Regulations of the Exchange and as approved by the Forward Markets Commission (FMC), no fresh positions (including intra-day) will be allowed in respect of Guar Gum (GARGUMJDR) and Guar Seed (GARSEDJDR) April 2012, May 2012, June 2012 and July 2012 expiry contracts from 22 March 2012 till the expiry of these contracts. Only squaring off of existing positions will be allowed.”

Currently, the stock is sharply down 11% from the 52-week high of Rs76.20 yesterday (12 April 2012). The company has been trending up in 18 of the last 24 trading sessions, and has been up in 48 of the last 70 trading sessions. What is interesting is that the share price dipped sharply, sometimes hitting the lower circuit, after trending up for a while. This seems to be the pattern when we analysed the prices since 1 January 2012.

Is the company up to something that the public and shareholders do not know? The share price movement alone should raise a warning signal for regulators to find out and investigate. But don’t expect the expensive inter-market surveillance system of SEBI to unearth anything.