Pyramid Saimira hits upper circuit after SEBI tells promoter to make open offer
Moneylife Digital Team 24 December 2010

The sudden spurt in the stock price will be an opportunity for investors who have been stuck with the shares

The market regulator, the Securities and Exchange Board of India (SEBI), on Thursday barred PS Saminathan, managing director of Pyramid Saimira Theatre Ltd (PSTL), from the markets and restrained him from becoming a director in any listed company for 10 years. Today, within hours of the SEBI announcement, the stock price of Pyramid Saimira zoomed to hit an upper circuit.

On Friday, Pyramid Saimira shares closed 19.94% higher at Rs7.46, while the benchmark Sensex ended the day up 0.5% at 20,073 points. The company's shares hit a 52-week low of Rs5.10 on 30th November and a high of Rs24.85 on 12th January.

The surprising element in trading today was that there were 2,23,363 buy orders pending with no sellers available. The Pyramid Saimira shares hitting the upper circuit is a boon for public shareholders who have been stuck with the shares for a long time now.

In its order yesterday, SEBI asked Mr Saminathan to make an open offer through a merchant banker to buy the company's shares from the public, through a public offer, by paying them the value determined by the valuer, within a period of three months.

SEBI said, "The fictitious entries in the books of accounts with a view to paint a rosy picture about the financial health of the company (Pyramid Saimira), disclosure of the inflated financial position and false corporate announcements mislead the investing public and constitute the worst kind of fraud on the part of the company, management and promoters. The issue of share warrants to promoters without receiving the consideration constitutes the worst kind of breach of trust of the investors."

SEBI had conducted an investigation into alleged fraudulent and unfair trade practices by Pyramid Saimira, its management and promoters. Surprisingly, the company levelled counter-allegations against the regulator, saying that it had no authority to probe its accounts.

In this regard, MS Sahoo, whole-time member of SEBI, said, "As regards inflated profits and revenues, the noticees (Pyramid Saimira) have stated that SEBI is not an expert body on accounts and the investigation into accounts of PSTL cannot be conducted by students of political science who are working with SEBI, but by an independent audit firm. SEBI's refusal to go ahead with audit by an independent audit firm indicates its bias against the noticees. Since the show-cause notice (SCN) is based on investigation of accounts of PSTL by SEBI, the noticees would not respond to the allegations in the SCN and would not provide the relevant records to the investigation authority. They have, however, stated that it is the prerogative of PSTL to maintain accounting records in a manner fit to the business exigencies and SEBI has no power to draw any inference in this regard. I find that the noticees wish to dictate how a statutory authority, which is authorised under the law to conduct investigations, would conduct investigation. Unfortunately, this privilege is not available to the noticees under the law. Refusal to conduct investigation in the way the noticees desire in no way indicates bias on the part of a statutory authority. Besides the allegations about competence of SEBI officials to investigate into affairs of a company is not in good taste."

In November 2009, the market regulator had directed Pyramid Saimira to restrain from dealings in the securities market for seven years, after the company was found guilty of allowing five persons to illegally corner shares from the initial public offering that had been reserved for employees of the company.

Appeals by the company against the order were dismissed by the Securities Appellate Tribunal (SAT) and the Supreme Court in orders on 7th April and 16th July, respectively. In addition, the Madras High Court, in September, appointed a provisional liquidator in the winding up petition filed by Patni Financial Advisors, one of the many creditors of the theatre chain, film production and exhibition company.

Also read:
What happens to investors?

Forgery by SEBI insider

Pyramid Saimira: Finger points to SEBI manager in forged letter case

SEBI: Commission & Omission

Times Group's private treaties housed under a new name

Value Investor
1 decade ago
What is government doing do prevent such fraud ? Lot of companies are having manipulated accounts ? can’t we prevent such fraud ?
Free Helpline
Legal Credit