Stock Manipulation Is Rampant & Unchecked: Here’s Why
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). 
 
  • Like this story? Get our top stories by email.

    User

    COMMENTS

    Anurag Sinha

    3 weeks ago

    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.

    haridsv

    3 weeks ago

    Would Mr. Rao be able to file a case in consumer forum against SEBI demanding penalty for disclosing his identity and causing mental agony?

    Sudhir Mankodi

    4 weeks ago

    Well researched article. Why heads in SEBI have not rolled? Please keep following up on the story. You are doing great service to the investors.

    Murugan S

    4 weeks ago

    Sad to see the callous attitude of SEBI. Better to stay away from these small companies.

    Vasudevan

    4 weeks ago

    Mr Rao could have baught one share while raising this complaint, then they cant sayhe is not an investor

    m.prabhu.shankar

    1 month ago

    Institutions failing are dangerous to our country

    Nagaraju Bommanahalli

    1 month ago

    Still no one gets severe punishment for corruption in SEBI,all agencies doing drama, court gave bail after bail for corrupt,

    Bipin Kochar

    1 month ago

    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.

    Prasanna

    1 month ago

    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.

    manish Gupta

    1 month ago

    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 “ !!

    Surendra

    1 month ago

    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.

    Rajneesh Agarwal

    1 month ago

    Excellent reporting..

    Geeta Vishwanath Poojary

    1 month ago

    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?

    Nagaraju Bommanahalli

    1 month ago

    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 [email protected] 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,[email protected],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

    MANOHARA RAO KODAVOOR

    1 month ago

    It is frustrating to note that no action is taken against these kind of fraudsters

    Nifty, Sensex may move sideways – Tuesday closing report
    We had mentioned in Monday’s closing report that Nifty, Sensex may come under pressure. The major indices suffered a minor correction. On the NSE, there were 813 advances, 964 declines and 366 unchanged. The trends of the major indices in the course of Tuesday’s trading are given in the table below:
     
     
    Sensex and Nifty opened marginally higher on Tuesday and traded flat as index heavyweights like Reliance Industries, SBI, Infosys and Axis Bank declined during the early trade. 
     
    The CBI has registered a case against former Maruti Udyog Managing Director Jagdish Khattar in connection with an alleged bank loan fraud of Rs.110 crore by his new company.
     
    Bharti AXA General Insurance has recorded a 46% growth in its gross written premium at Rs.1,586 crore in the first half of financial year 2019-20 against Rs.1,087 crore in the corresponding fiscal period a year ago. Motor, health and travel steered the growth for retail channel which registered 38% increase in revenue in the April-September period this financial year over the same period in the last financial year.
     
    IFCI had earlier announced regarding disinvestment of its entire stake in National Stock Exchange of India comprising of 1.20 crore equity shares comprising of 2.44% of the total equity shares of NSE. IFCI has realized an amount of approximately Rs805.60 crore, representing about 82% of the total committed amount. 
     
    BHEL has successfully commissioned the first lignite-based 500 MW thermal unit of the 2x500 MW Neyveli New Thermal Power Project in Tamil Nadu. This is the country's first lignite-fired 500 MW power plant. Also, it is the highest rating pulverised lignite-fired thermal unit commissioned in the country so far. Located in Cuddalore district of Tamil Nadu, the project is owned by NLC India. The second unit of the project is also in an advanced stage of commissioning.
     
    Transformers and Rectifiers India has been awarded the order of transformers amounting to Rs.166 crore from Transmission Company of Nigeria Plc, Maitama, Abuja (World bank funded Project). The said order falls under the normal course of business. With this order, the order book as on date stands around Rs.1,161 crores.
     
    Elantas Beck India may acquire intangible assets pertaining to the wire enamel business from Huber Group India at a consideration, not exceeding Rs.45 crore, plus GST at applicable rate.
     
    The top gainers and top losers of the major indices are given in the table below:
     
     
    The closing values of the major Asian indices are given in the table below:
     
     
     
  • User

    Nifty, Sensex may come under pressure – Monday closing report
    We had mentioned in Saturday’s closing report that Nifty, Sensex were overbought but still trended higher. The major indices closed with minor losses. On the NSE, there were 839 advances, 969 declines and 345 unchanged. The trends of the major indices in the course of Monday’s trading are given in the table below:
     
     
    Selling in index heavyweights like Reliance Industries, ICICI Bank and State Bank of India led the Sensex and Nifty to finish marginally lower, although 28 of the Nifty 50 stocks gained at close.
     
    The Registrar of Companies under the Corporate Affairs Ministry moved the National Company Law Appellate Tribunal seeking modification in its order in the Tata Sons matter where it wants removal of the word "illegal" with respect to conversion of Tata Sons from a public company to private company which was done after the government body's approval. It also stated that its decision on conversion following Cyrus Mistry's exit was not done in a hurry and was done after proper scrutiny and due diligence.
     
    Larsen and Toubro's Technology Services arm has bagged a multi-million dollar project from a European firm to provide engineering, procurement and construction management services.
     
    Bharti Infratel will discuss the next step to be taken in the board meeting on December 24 on if an extension is to be sought for the Infratel merger with Indus Towers announced in April last year, sources said. The deal has already missed October 24 deadline for want of approvals and the current deadline expires on Tuesday. The deal needs clearance from the Department of Telecom which needs nod from Finance Ministry in view of an international arbitration of an old case when Vodafone bought Hutchison stake in Indian telecom arm in an 11 billion dollar deal.
     
    Shares of Lux Industries fell more than 7% after promoters Ashok Kumar Todi, Pradip Kumar Todi, Prabha Devi Todi, Bimla Devi Todi and Shobha Devi Todi sold 1.04%, 0.99%, 0.40%, 0.89% and 0.89% stake respectively, through block deals today on the BSE and NSE, the company said in its BSE filing. 
     
    Their combined stake sold was 4.21%. After this, promoters' shareholding reduced to 69.51% from 73.71%.
     
    SpiceJet has said that three of its B737 freighter aircraft, which were grounded earlier this month due to a "potential defect", would return to operation on Monday.
     
    The top gainers and top losers of the major indices are given in the table below:
     
     
    The closing values of the major Asian indices are given in the table below:
     
     
     
  • User

    COMMENTS

    Raj Tejuja

    1 month ago

    On Nifty fifty stocks

    We are listening!

    Solve the equation and enter in the Captcha field.
      Loading...
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email

    BUY NOW

    online financial advisory
    Pathbreakers
    Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
    online financia advisory
    The Scam
    24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
    Moneylife Online Magazine
    Fiercely independent and pro-consumer information on personal finance
    financial magazines online
    Stockletters in 3 Flavours
    Outstanding research that beats mutual funds year after year
    financial magazines in india
    MAS: Complete Online Financial Advisory
    (Includes Moneylife Online Magazine)
    FREE: Your Complete Family Record Book
    Keep all the Personal and Financial Details of You & Your Family. In One Place So That`s Its Easy for Anyone to Find Anytime
    We promise not to share your email id with anyone