Well Done SEBI in 2015 for the Sabero Organics Insider Trading in 2011 !

On May 31,2011,while the Iron was yet Hot, I had blogged extensively giving vivid details of the Blatant Insider Trading in Sabero Organics before the announcement that it was being acquired at Rs 160…The Price was just Rs 58 ! in mid May 2011 and flew in the second fortnight of May 2011 just prior to the the Takeover announcement

Coromandel International this morning ?..BSE and SEBI need to quickly investigate and Leading Newspapers need to quickly highlight

Tuesday, May 31st, 2011

Well Done SEBI in 2015 for the Sabero Organics Insider Trading in 2011 !

Finally SEBI nailed A Vellayan,the Chairman of Coromandel International (CI)  and others for their role in the blatant Insider Trading in Sabero Organics (SO) in  May 2011 before  CI announced they were acquiring SO at a price three times more than what it was quoted prior to aggressive buying before making the announcement…Here is their Order

It’s an Eight Page SEBI Order by Whole time Director Prashant Saran of SEBI

A Vellayan,Chairman of CI and EID Parry of the Murugappa Group has been accused too with Saran stating that unpublished price sensitive information (UPSI) must have been communicated by Mr Vellayan to his distant relative and accused A.R. Murugappan who is the father in law of accused V Karuppiah who in turn was a friend of chief accused Gopalkrishnan C who was funded Rs One Crore to buy Sabero Organic Shares by A R Murugappan

Group Spokesman said that in keeping with family values and tradition, A Vellayan has stepped aside as the Chairman of the Murugappa Group till this matter is resolved  and he will contest the SEBI Order.The Group states that SEBI’s observation in linking A Vellayan to the two who actually did the Insider Trades  is based on suspicion and is a far-fetched tenuous conjecture and the interim order does not prove the link conclusively

A few threads I have picked from SEBI’s Order  and my views on them  :

  • SEBI has been reactive in this case….they needed to be proactive when this blatant game was being played out in May 2011 or immediately thereafter rather than await someone to lodge a formal complaint……what happens in many insider trading cases where no one complaints to SEBI ! ? The Order begins like this:

 1. SEBI on receipt of certain complaints alleging therein that the unpublished price sensitive information (hereinafter referred to as ‘UPSI’) pertaining to the acquisition of the shares of one Sabero Organic Gujarat Limited (hereinafter referred to as ‘Sabero’) by Coromandel International Limited (hereinafter referred to as ‘Coromandel’) was leaked to certain persons, who were acting in concert with the management of Sabero/ Coromandel, initiated a preliminary examination into the matter. Later, a detailed investigation was conducted by SEBI for the period of May 15, 2011 to June 15, 2011. read more

Huge Insider Trading in Sabero Organics as Promoters Chuganees sell out to Coromandel International this morning ?..BSE and SEBI need to quickly investigate and Leading Newspapers need to quickly highlight

This morning Sabero Organics hit upper circuit on BSE at Rs 97.90 as news officially broke that that the Promoters Chuganees were selling out in toto their full 42.22 % Equity to Coromandel International (CI),a Muruggapa Company at Rs 160 a share + Rs 38.47  non compete component too => Rs 198.47  

http://www.expressindia.com/latest-news/Coromandel-Intl-to-buy-Sabero-Organics/797511/

CI will also offer to buy out another 31 % of the Equity from the remaining shareholders for a   total stake of 73.22 %

But this sell out by the Chuganees was known to insiders a fortnight earlier this month….look at the trading pattern below on BSE from May 16,2011  to date….clear case of Insider Trading……Sabero was languishing below Rs 60,low volumes and number of trades and then a sudden burst of Volumes and Trades and intermittent upper circuits from May 16,2011

From Daily Turnover of Rs 20 lakhs to Rs 30 lakhs the turnover bursts into Rs Crores from May 16,2011…in fact in just 12 trading days from May 16,2011 to date May 31,2011 the BSE Turnover aggregated Rs 127 crs + in Sabero Organics…could have been more if upper circuits were not hit…..standing out are the Tuesdays May 17 and May 24….38 + lakh shares aggregating Rs 29 crs + and near 28 lakh shares aggregating near Rs 25 crs respectively…and today too is a Tuesday when the announcement was made….Insiders probably are great ‘bhakts’ of ‘Siddhivinayak Lord Ganesha’ ! 

So who leaked the sell out by Chuganees to the Muruggapas at thrice the market levels of Rs 60 before the announcement this morning…..only three root sources could be there….Someone close to or in Sabero Organics,someone close to or in Coromandel  or someone close to or in the Investment Banking and Valuation team who are advising and involved in the deal…and as deals have to be put through Brokers,it is logical to assume even involvement of Brokers in this……..

incidentally the Valuation of Rs 160 is simply terrific…thrice the market price levels of Rs 60……wonder who did this and what is the basis….and is there some hidden agenda in such a high valuation to market price ?

With insider aggregate BSE turnover at Rs 127 crs + and aggregate Volumes of 1.56 crs shares for last 12 trading days and observing weighted average prices and daily volumes,I can safely observe that in just twelve trading days already Rs 40 crs + profits at the BSE have been accumulated  with the promise of this figure likely to cross Rs 100 crs in the coming days read more

Blog Viewer Queries and my responses…..Birla Power Solutions at Rs 1….Tulsyan NEC at Rs 46…..Marg at Rs 90+,Sanghvi Movers at Rs 110+,NIIT Tech at Rs 180+….Sabero Organics at Rs 97 +……Deccan Gold at Rs 20+…Garnet Constructions at Rs 12

Blog Viewer Queries

  • Birla Power at Rs 1
  • Tulsyan NEC at Rs 46
  • Marg at Rs 90+
  • Sanghvi Movers at Rs 110+
  • NIIT Tech at Rs 180+ 
  • Sabero Organics at Rs 97 +
  • Added later…..Deccan Gold at Rs 20+
  • Added later…Garnet Constructions at Rs 12

Thought I would give my brief observations on all of the above queries from blog viewers…..am reproducing both viewers queries and my brief responses  as this seperate blog post for wider and easy viewing

BIRLA POWER SOLUTIONS AT RS 1

BSReddy Says:

May 29th, 2011 at 7:34 pm 

Dear Sir ,
What about Birla Power Solution Ltd ,which is near Rs 1 /

 Gaurav Parikh Says:
May 29th, 2011 at 9:55 pm

Hi B R Reddy…thanks for your response…this specific blog post listed ten scrips between 20 and 30 and what you think they would be in 2012 if sensex is between 20k and 30k….A few years ago I had cautioned on Birla Power Solutions….I had a quick relook at it at par Rs 1 as this is the FV too …..Volumes are currently 15 lakh shares though average six month daily volumes are 75000 shares…. 52 week high/low is Rs 2/Rs 1…but margins and profits are very low…profits are in a few crs though sales crossed Rs 230 crs last year and will have crossed Rs 250 crs for FY 2011…amusingly it declared a 1:5 Bonus last year as well as a dividend of 7.5%…it carries debt of over Rs 100 crs while funds tied up in Debtors and Inventories last year aggregated over Rs 175 crs..Sales were Rs 238 crs….currently manufacturing portable gensets and engines for gensets it now plans to enter the field of power generation through two subs Birla Energy Infra Ltd and Birla Urja Ltd…it needs funds…has constantly….has raised Authorised Capital to Rs 425 crs….With Profitability in single digit Rs crs and Equity at Rs 215 crs,don’t expect any dividend for FY 11 that just passed….if they do foolishly declare one,they will have to dive into GDR proceeds of earlier years to distribute,if any are yet available….while I feel the downside is 75 paise,any uptick from here will be more on momentum,hype,sentiment and anticipation and blind faith in a Birla Company rather than on fundamentals…Yash Birla Group companies do not command much respect or premium on the bourses or in business…another of his group companies is Birla Shloka ….it is just Rs 15…it has a 52 week high of Rs 94 and the FPO in Jan 2010 was at Rs 50 for a FV Rs 10 share….if you wish to make monies in Birla Power, don’t depend on fundamentals to support upmoves from Rs 1….more likely on collective hype and hope…Cheers !

TULSYAN NEC AT RS 46-RS 49

AMIT GUPTA Says:
May 30th, 2011 at 3:50 pm  

whats your view on tulsyan NEC

Gaurav Parikh Says:
May 31st, 2011 at 12:05 pm 

Amit……Tulsyan NEC suffered from a very high Debt…over Rs 220 crs last year from a Total Capital Employed of Rs @Rs 285 crs…recent 2:1 Rights Issue at Rs 49.50 will triple Equity to Rs 15 crs and move Networth to Rs 120 crs…this will reduce Debt Equity towards 2:1…..Consolidated Turnover is Rs 876 crs for FY 11 but bottomline is a mere Rs 9 crs because of the high Interest outflow of over Rs 32 crs…they also faced huge Power cuts…40% in FY 10…affected capacity utilisation…they also faced some price hurdle to source sponge iron….they have since bought out a 35000 MT Sponge Iron Manufacturer Chitrakoot and are setting up a 35KV Thermal Power Station…Steel sales account for near Rs 700 crs of the turnover…rest is poly packaging synthetic division sales…it is a dividend paying company…65% + equity is held by the Promoters….I see little downside from here….Trading Volumes are low….would keep it as a ScripWatch rather than ScripSelect right now…Interestingly Market Cap is only @ Rs 70 crs on enhanced capital with share price in the mid Rs 40s levels…it remains a small company in this sense…sold 1.5 lakh ton of Steel and @ 12000 t on Packaging…has over 1500 employees …..will get re-rated only when Debt levels drop significantly to Rs 100-Rs 150 crs range and therefore Debt/Equity to 1:1….Keep a watch …..Cheers read more

Sell SABERO ORGANICS GUJARAT @ Rs 65-Rs 70 range on Corporate Governance issues

Over two years ago on Thursday,August 7,2008 I had initiated a SS 1 recommendation of Crop Protection Chemicals Company,SABERO ORGANICS GUJARAT at Rs 26 as a potential multibagger

It rose to levels of Rs 80 + and is now quoted at Rs 65-Rs 70 range…I had it in the Potential Multibaggers Segment in 2008 and early 2009 and as Share Price crossed Rs 50 I moved it to the Growth Segment last year….even in recent blogs I had opined that Sabero holds potential

But have just taken a Call to recommend a ‘Sell’ for SABERO ORGANICS GUJARAT on Corporate Governance and lack of Transperancy Issues that specifically deal with no clarification forthcoming from the Company on the recent adverse Press Report for fradulent exports and also if any court cases were recently filed in the past two years against the company and if any consent terms were filed and any restraining clauses or orders  

Press Reports allege that SABERO ORGANICS has been caught exporting large quantities of herbicide under the registered trade name of it’s competitor,Excel Crop Care which is a Shroff Group Listed Company quoted at Rs 320 today and a pedigree of 60 years and was earlier called Excel Industries Ltd

Check out the report in the October 11,2010 edition of The Afternoon Despatch & Courier,a local late morning Mumbai tabloid 

http://www.afternoondc.in/city-news/spurious-pesticides-affecting-agriculture-farmers/article_10472

Am aware that Corporate warfare and vested interests and planted media leaks may be involved here…..and would have liked to hear the Company clarify on this…..however it has stayed quiet so far on this adverse press report…..  this heightens the risk of remaining invested…..commonsense directs and dictates that when in doubt stay out or get out..eliminate the risk…exit the scrip

Am also aware the Company is to declare  it’s Q2 September 30,2010 results today..but have decided to make this call to Sell regardless of the results

If you are on my wavelength on this and have invested in SABERO ORGANICS my advise to you is to exit,even at a loss if you’ve brought it at Rs 70+ in 2010….most of you will be booking profit if you’ve picked it up in 2008 and 2009 and in early 2010

Two Rs 75 Scrips that yet look interesting…Sabero Organics & S Kumars Nationwide

Two Rs 75 Scrips….Both yet look fundamentally interesting,depsite their significant rise past two years……Crop Protection Chemicals,Sabero Organics & Textile Retailing, S Kumars Nationwide….clients have interests in both..have recommended them earlier too…they yet look good for further appreciation to Rs 100+ in the coming Year…consider for the Growth Segment of your Equity Portfolio…they may no longer be a constituent of the Multibaggers Segment with entry at these prices

Cheers !

Sabero Organics crosses Rs 80……up from Rs 24,when first recommended in the second half of 2008….now on it’s way to Rs 100 and beyond

I initiated recommending Sabero Organics in 2008 at Rs 24….I blogged twice again on it…it’s now Rs 80+ and poised to cross Rs 100

Check out my earlier three blogs on Sabero Organics http://www.gauravblog.com/?s=sabero

Cheers !