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Another Future Group company, Pantaloon Industries, also bought 98 lakh shares for another Rs8 crore to prevent a further fall of the stock price on debut. But the Future Ventures share is still struggling well below its issue price
Future Ventures India Ltd, the investment company promoted by Future Group's Kishore Biyani, made its debut on the stock exchanges yesterday. On the first day of trading itself, the scrip underperformed and closed 17% below its issue price.
On the Bombay Stock Exchange (BSE), the share made its debut at Rs9.50, and after touching an intra-day low of Rs7.95, it closed at Rs8.30. Around 76 million shares were traded on the stock exchange.
There was panic among retail investors as the scrip underperformed on the opening day itself and this led to heavy selling of the company's shares. In the middle of this chaos, Pantaloon Retail, another company of the Future Group, purchased about 99.55 lakh shares of Future Ventures at Rs8.20.
Interestingly, Pantaloon itself hasn't shown any robust growth in the last quarter. So, given its own weak financials, this move by the company, to buy shares of Future Ventures, raises several doubts. Pantaloon Retail's net profit for the quarter ended 31 December 2010 stood at Rs19.91 crore, up just Rs2.33 crore from Rs17.58 crore in the preceding September 2010 quarter.
Further, Pantaloon Industries, yet another group company, also bought 98.25 lakh shares of Future Ventures yesterday at the price of Rs8.20. The promoters of the group company were prompted to buy Future Ventures shares after witnessing the heavy sell-off on the counter, and this helped the stock recover some upward momentum.
The Future Ventures stock followed the same trend on the National Stock Exchange (NSE) as well. On the NSE the share made its debut at Rs9. It touched an intra-day high of Rs9.65, but closed the day at Rs8.20. Around 174.75 million shares were traded during market hours.
A simple calculation would reveal that Pantaloon's decision to buy the Future Ventures shares cost it around Rs8.16 crore. This appears strange, for the company's net profit in the December 2010 quarter was just Rs19.91 crore. Analysts expect that the stock will slide further. This could see the company suffer losses.
Future Ventures raised Rs750 crore through the initial public offer of shares priced at Rs10 each. The issue was subscribed 1.5 times. The company's shares were mainly subscribed by high net worth individuals, while the quota for institutional and retail investors was under-subscribed.
Moneylife has reported earlier how the Future Ventures prospectus stated that it cannot compare the promise and performance of Galaxy Entertainment, the company it acquired, because it did not have the IPO records of Galaxy which are legal documents. Still, SEBI cleared the Future Ventures prospectus, unaware of this irony. (Read, 'Future Ventures says it does not have IPO documents of a listed company it acquired three years ago'.)
Meanwhile, in trading today, the Future Ventures stock rose to Rs8.60 from yesterday's close of Rs8.30 on the BSE. On the NSE, the stock closed at Rs8.60, up from its previous close of Rs8.20.
The stock price of the country’s only listed microfinance firm crashed 35% in two trading sessions, leading the market regulator to initiate an inquiry into possible insider trading
The SKS Microfinance stock price crashed by 20% on the bourses on Friday, after brokerage house JP Morgan slashed the target price of the country's only listed microfinance firm by more than half, to Rs200, from the earlier Rs550.
Even as speculation is rife over the hammering of the scrip, market experts are questioning the timing of the advisory released by JP Morgan, as it was released shortly before the announcement of the company's fourth-quarter results.
One market expert pointed out that only two days before the results, the financial portal moneycontrol.com published a report, titled "Bear of the day: Stock that plunged 58% in 6 months", in which it described how SKS has "lost 58.30% in the last six months."
"Two things happened before the results-the story on moneycontrol.com and the JP Morgan sell advisory. The timing looks suspicious. In my opinion it is both bear hammering and an insider trading violation," he explained.
The JP Morgan report cited challenges ahead for SKS and slashed its target price. Then on May 6, the shares price of SKS Microfinance plunged by 20% to Rs331.30, its lowest ever.
The 20% fall on Friday was coupled with a 10-fold surge in the stock's trading volumes, prompting the bourses and market regulator Securities and Exchange Board of India (SEBI) to consider a probe into the possible breach of insider trading norms, or hammering by a bear cartel.
Strangely, the SKS stock price crash coincided with a strong upward trend in the market, as the BSE Sensex rose by over 300 points, and came only a few days after the Reserve Bank of India said that bank loans to microfinance lenders would be categorised as priority sector lending.
On Friday, the company announced that net profit fell 36% to Rs111.63 crore in the quarter to 31 March 2011, compared to Rs174 crore in the corresponding previous period.
The surge in trading volumes and a heavy fall in the share price when the company announced a loss only after market hours is being seen as an unusual event by market surveillance authorities who have therefore initiated a preliminary probe.
On Monday, the SKS stock continued to fall, losing over 18% to a new low of Rs268 as analysts forecast a dull outlook for the microfinance lending sector. Volumes continued to surge. Over 27 lakh shares were traded on Monday, which was double the volume that was traded on Friday.
The company has said that it would welcome an inquiry by the regulator, to investigate the circumstances leading to the fall in the share price.
Moneylife sent e-mail messages to JP Morgan and moneycontrol, as well as SEBI, seeking their comments on the questionable timing of the advisory and the publication of the story. The messages have not been answered.
The SKS Microfinance stock price climbed steadily through the morning trade on the Bombay Stock Exchange today, and closed at Rs297, a gain of 10% over its previous close of Rs270.
Expect selling pressure at the Nifty level of 5,600