As a rule, Moneylife advises readers to steer clear of highly volatile penny stocks that thrive on our bourses and dupe the gullible. They fluctuate between a few rupees to a few hundred rupees in a matter of months and there is little sympathy for retail speculators who lose their hoping to turn millionaires by finding a hidden diamond in online tip-sheets. Why does this go on unchecked? Because the regulator doesn't care.
We know that the Securities and Exchange Board of India (SEBI) spends crores of rupees on its market surveillance software. It also claims to use artificial intelligence to track social media for insider trading. This is quite laughable when SEBI seems reluctant to use simple native intelligence. As a result, fake news websites, complete with cooked up research reports, operate openly through message boards of large media companies or with names that sound similar to well-regarded value investment forums.
We must remember that this brazen manipulation is happening in listed entities on national bourses, which are technically subject to very strict reporting requirements, disclosure rules and corporate governance standards.
Ironically enough, they appear to be using the very disclosure rules to misinform and manipulate, because neither the stock exchanges nor the market watchdog want to investigate or look at the quality of disclosures.
Well, here’s a case study of how SEBI treats informants attempting to expose wrongdoing and judge for yourself. The company, Urja Global Ltd, is listed on both, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). Our whistleblower, Surendra Singh Rao is at pains to point out that it is just one among hundreds that use the same modus operandi.
Urja Global calls itself a leading non-renewable and renewable energy developer and operator which is ‘an approved’ channel partner by the relevant ministry. Its website lists an impressive range of projects and announces a global tie-up every few months.
And, yet, the stock price is low and extraordinarily volatile. It rose from around Re1 in October 2017 to a high of Rs11.43 in January 2018 and was down to Rs2 by October 2018. It again started to rise in November 2018 but has been on a long decline since then to Rs1.75 as of 24 December 2019.
The price movement seems trivial but is sharp in percentage terms. It is usually accompanied by focused hype and glowing ‘research’ reports on several investment websites. But more about that later.
Why does Mr Rao link the stock manipulation with the management? Consider these curious corporate announcements by Urja Global.
Strange Announcements
On 13 July 2019, Urja Global informed the BSE about entering into an agreement with Nippon Shinyaku Co Ltd, of Japan, to supply a product called Zacobite for five years. This would help it develop a domestic and international market, it said.
Mr Rao was suspicious about this claim, given the company’s propensity to make such disclosures that didn’t seem to materialise (these include plans for green bonds, e-rickshaws and e-cars and a university, among others). So he looked up Nippon Shinyaku and wrote to the Japanese company asking about the Urja deal.
In less than three days, Nippon Shinyaku sent him a categorical response. It neither knew Urja Global nor was it involved in the Zacobite business. It went on to say, “we think the information on Zacobite seems to be fake.”
Nippon Shinyaku also put an announcement on the homepage of its website warning people to ‘beware of fraudulent information’.
What Did the Regulators Do?
Excited at the developments, Mr Rao filed a complaint with SEBI’s online complaint system (SCORES) and also wrote to the entire SEBI top brass informing them about his finding (note the number of officials marked in the email above). He expected a full investigation into his findings about the company’s disclosures.
Instead, the SCORES lived up to its reputation of acting as a post-office. It forwarded the complaint to the BSE which, in turn, wrote to Urja Global asking it to respond to the investor with a copy to the Exchange. Neither the regulator nor the bourse was interested in investigating the matter on their own or issuing a show-cause notice to the company.
Urja Global’s company secretary accused Mr Rao of filing a false complaint and didn’t even bother to address the issue, since he was not a shareholder and unwilling to provide his folio number.
But Urja was probably rattled at Mr Rao’s probing. Less than a month after the announcement, it filed a shady ‘clarification’ with the Exchanges. Its letter first says that it will supply the product (Zacobite) only when it receives advance payment from the Japanese company. In the very next paragraph, it says it was ‘withdrawing’ the agreement to “to avoid any further misunderstanding between the stakeholders and the Company.”
The BSE accepted Urja’s response without a murmur and forwarded it to SEBI which was even worse in its mindlessness.
It wrote to the investor that he was not a shareholder and treated the matter as closed, since Urja Global had ‘clarified’ that the agreement was withdrawn. What is worse, Mr Rao says that, since his information has been disclosed to Urja Global, he has been harassed through repeated calls from the company.
SEBI’s response makes you wonder whether its officials have even a rudimentary understanding about the reason why such detailed and copious disclosures are mandated under its repeatedly tightened corporate governance and disclosure rules.
In 2018, Urja Global had announced two tie-ups with Chinese companies. In March this year, it disclosed to the BSE and NSE that it has a MoU (memorandum of understanding) with the Andhra Pradesh government to manufacture electric cars and lithium ion batteries in the state. Given its finances and how the stock price is languishing, that, too, seems like a tall claim.
Urja’s other disclosures to the Exchanges also signal that all was not well internally. For starters, the three key executives—chief executive officer (CEO), chief financial officer (CFO) and company secretary and compliance officer don’t seem to have lasted more than a few months. In January 2019, its CEO, Bharat Pranjivandas Merchant, resigned. At the end of May 2019, it appointed Ms Priya Bhalla as the new CEO, who resigned in four months (23 September 2019). Another CEO—Dhiraj Sisodia was appointed in November. The company secretary and compliance officer also lasted less than a year and the CFO is also new.
This article would not be complete without a word about Urja Global’s finances. The company’s latest numbers show a tiny net profit of just over Rs1 crore on a turnover of around Rs130 crore and hasn’t paid a dividend. And, yet, the moneycontrol.com website lists it as a stock that 60% of its users are recommending as a buy and is listed among ‘stocks in the news’. Will someone ask how and why?
Mr Rao’s attempt to speak to SEBI officials or meet them has been rebuffed every time. He is not alone.
Angry youngsters, fed up with the brazen manipulation of stocks and the regulator’s refusal to act, have begun to make YouTube videos and post them online to warn people of the market manipulation fraud. There are hundreds of listed companies whose stock price continues to be manipulated with audacious impunity. For more than six years, Moneylife has documented more than a hundred such cases. But SEBI couldn't care less.
Even as I write this article, SEBI has created a brand new ‘Office of Informant Protection’ (OIP) and introduced new guidelines under the prohibition of insider trading rules. Will they work at encouraging and protecting informants or be another desk that sees and hears no evil?
Given how SEBI has handled the Urja case—with callousness and disdain—can we expect any better from SEBI’s OIP which presupposes a far greater empathy and understanding?
(Note: We have written to the BSE, SEBI and Urja Global for their response to the issues raised here. We will update this article with their responses, if we hear from them).
Very good support to retail investors by you. Actually govt, big players, promoters looting retailers money. After you buy a few shares price always falls within seconds. They earn buy selling mere paper. After you exit again rises. They let nobody to profit. They deceit you by showing rises in graphs. But fact is any big company's share falls from even Rs10,000/- to Rs 1/-
but rises after your exit only. Check MRF etc.
Sebi simply does not care. on quora you can find many people making complaints and sharing how a particular discount broker in day trading does not allow them to exit the orders in profit and indulges in proprietary trading . sebi simply does not care.
SEBI sadly has become completely dysfunctional over the years and has consistently failed to protect investors interest and typically dealt with malpractices by either ignoring them or with a light penalties - it's high time that the Government shuts it down and replaces it with a bold incorrigible institution like the Securities Exchange Commission of the USA.
What is required is a Change of Attitude at SEBI. No amount of laws and regulations will help investors if Regulator wants to show that it is sleeping when it is dozing off on purpose. Money Life's next investigation should be how many employees and officers of SEBI have lost money in the markets in this fashion? The answer would be none. Why??? Start thinking on how to get the Regulator to act like a Regulator for small investors as well only when small investors see results will the Equity market really grown in India. Else we are just paying lip service and building more bureaucratic institutions which serve little purpose.
amazing reporting and investigation ... such a thankless job but MoneyLife excels at these , I say more power to such institutes and protection from Govt .. hope SEBI ever wakes up and feels it too has “balls “ !!
Hi Everyone, I am Surendra Singh Rao, I would like to thank Sucheta mam for helping me a lot in this other cases, However this really breaks me like anything when institution like SEBI has disclosed my information when the information was given for law and enforcement purpose, as per RTI ACT 2005, such information can not be shared as well, even if there is no such law, it is not supposed to disclosed but I am at the receiving end only, I would request everyone that if you do not understand this market then close your Dmat account because once you are trapped no one will listen to you. SEBI, BSE & NSE charge fees on each transaction so they are like service providers but there is no care, if you do not trust me then just speak to any officers, you will come to know, Same way many companies have come and run away , nothing happened - only few will at least listen to you. someone will even go on to hung up the call by saying that do not call me.
No body can trust an organisation like SEBI.
And they are responsible for handling cases like Pancard Clubs Ltd. where precious assets are being sold. What is the guarantee that SEBI is getting correct market price for the assets being sold?
I will ask both both parties please reply ,how much money recovered till today by selling assets of fraud persons who taken huge fraud loans,how much money returned to the bankrupted bank account holders , don't do drama,my friend lost several lakhs from Alpic finance a NBFC in twenty five years back, but till today he have not received single paise , this Alpic finance company is a subsidiary of Cipla group, this NBFC done huge fraud,but till today no action taken, these companies go to court and take stay order for the sale of theirs assets, Court will drag the case to twenty to thirty years at that time all investers will die, these fraudessters enjoy our loot money with political leaders, these are all drama nothing will happen only poor will die , why not Auditors arrested who have been submitting manuplated Audit reports by fabricating balance sheets. Even concerned officials from RBI are also equally liable for this situation. We need to initiate proper legal steps to compel RBI to immediately resume normal operations of Bank.In past history no business man who had taken huge fraud loans are not punished by court,ask these RBI give the list of who had punishment for such crime in India, nothing only poor people are finished from these fruduster, former finance minister chidambaram who had made banks to give loans by phone calls is getting bail after bail from all courts ,his son has thousand crores money in foreign country, these money has gave by Vijay malya like business men for getting fraud loans,no hope for our India , UPA gave 70%fraud loans , NDA has gave 30%fraud loans,one is 840and another is420, this is only difference, both parties taking India to bankruptcy,no hope for common people
In India nobody knows how Indian companies are doing fraud from the beginning to last ,for example a big business men will start the company in India as below .His companies actual value is Rs2000crores but with the help of the auditors,Banks,and chartered accountants he made his company s values to RS 6000 crores by book adjustment with bribe and he call IPO that is in share market and collect Rs10000 crores in share market, first he pumped 60%of money to foreign country in the name of business and will deposit most of the money in his name next he will file bankruptcy due to losses and will write off all the loans this is the business doing in India ED is doing drama ICICI Bank chandakochar is well known to all she done huge fraud in ICICI Bank, this drama of enquire is doing from past one year, but still she is not arrested, reasons In this icici bank scam all SEBI auditors ED RBI central government rating agencies big leaders of all parties involved.central government making all efforts to avoid arrest these fellows,if arrested all all foreign country become knows most of the Indian companies running on bogus and take away all foreign investment,then India become bankruptcy.This is well known by central government hence avoiding all efforts to arrest directors of icici bank chandakochar DHFL jetairways Videocon kingfisher airline PNB bank head il@fs etc .even Vijaymalya kingfisher airline companies don't have single plane in his companies name but all banks gave Rs10000 crores money, same type loans gave to jet airways,DLF, Devan housing finance company,il@,fs,etc wait in few months most of the common people investment in icici bank NBFC PSU banks equity NCD mutul funds become Zero,All parties RBI officers, SEBI, etc are corrupt they are taking India towards bankruptcy
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And, yet, the stock price is low and extraordinarily volatile. It rose from around Re1 in October 2017 to a high of Rs11.43 in January 2018 and was down to Rs2 by October 2018. It again started to rise in November 2018 but has been on a long decline since then to Rs1.75 as of 24 December 2019.
but rises after your exit only. Check MRF etc.
And they are responsible for handling cases like Pancard Clubs Ltd. where precious assets are being sold. What is the guarantee that SEBI is getting correct market price for the assets being sold?
In India nobody knows how Indian companies are doing fraud from the beginning to last ,for example a big business men will start the company in India as below .His companies actual value is Rs2000crores but with the help of the auditors,Banks,and chartered accountants he made his company s values to RS 6000 crores by book adjustment with bribe and he call IPO that is in share market and collect Rs10000 crores in share market, first he pumped 60%of money to foreign country in the name of business and will deposit most of the money in his name next he will file bankruptcy due to losses and will write off all the loans this is the business doing in India ED is doing drama ICICI Bank chandakochar is well known to all she done huge fraud in ICICI Bank, this drama of enquire is doing from past one year, but still she is not arrested, reasons In this icici bank scam all SEBI auditors ED RBI central government rating agencies big leaders of all parties involved.central government making all efforts to avoid arrest these fellows,if arrested all all foreign country become knows most of the Indian companies running on bogus and take away all foreign investment,then India become bankruptcy.This is well known by central government hence avoiding all efforts to arrest directors of icici bank chandakochar DHFL jetairways Videocon kingfisher airline PNB bank head il@fs etc .even Vijaymalya kingfisher airline companies don't have single plane in his companies name but all banks gave Rs10000 crores money, same type loans gave to jet airways,DLF, Devan housing finance company,il@,fs,etc wait in few months most of the common people investment in icici bank NBFC PSU banks equity NCD mutul funds become Zero,All parties RBI officers, SEBI, etc are corrupt they are taking India towards bankruptcy