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A Lion’s eye on the Bulls and Bears

“In India, companies may fall sick, but promoters rarely do!”

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SRK in the BAG !..but BAG not in the BAG!

Just spotted a news headline that SRK is in the BAG…..It seems Star Actor, Shah Rukh Khan, is planning to tie up with his friends, the promoter couple of the BAG Group to provide TV Content and even possibly produce TV Shows on BAG’s new TV channels.

Hey SRK just check out what your friends, the promoter couple did a year or two ago…they purchased lakhs of shares of their own company on the BSE in the Rs 9 to Rs 11 range and a week later announced that one of the promoters of India Bulls will invest Rs 26 crores in his personal capacity in the equity of the Company by taking up a preferential allotment of Two Crore shares at Rs 13 each…. Promoters also allotted convertible warrants to themselves… I’m sure they had a good reason for doing, possibly to shore up their stake before allowing the preferential allotment … Amusingly and quite ironically, I must add, the Company had to inform the BSE about these open market purchases by promoters under Insider Trading Rules… all of these announcements are there in the public domain on the BSE website… The share price simply started zooming upwards past Rs 50 and beyond.. It ofcourse is now down to Rs 30.

Interestingly when I put this before our young generation…. young  20 to 22 year olds in three premier education institutes in Mumbai, the girls felt this was not ethical while  the boys felt there was nothing wrong but had no answer to what about those poor shareholders who sold at Rs 9 to Rs 11 not knowing about the preferential allotment and wanting just an exit after being trapped at higher prices in this company’s shares in their IPO issue. 

I had earlier advised my clients to invest in BAG Films as I was excited about their foray into Radio Channels through their subsidiary and the Institutional support of IDBI who had acquired an equity stake in the company… However on these announcements I advised  clients to exit, giving them my reasons even though I told them  that the share price would soar… all of them preferred to exit and not one has regretted that the share price actually crossed Rs 80 afterwards!

How all of this missed BSE and SEBI.. I don’t know!

SEBI investigating 3656 cases of Corporate Fraud at Stock Exchanges!

SEBI Whole Time Director Mr T C Nair revealed a startling statistic at an ASSOCHAM Conference on Corporate Fraud held recently in New Delhi

He said that SEBI was investigating 3656 cases of Corporate Fraud at Stock Exchanges.In 2007 SEBI had received 169 corporate fraud complaints,most of which related to Market Manipulation

Let’s rationally take listings on Bombay Stock Exchange as the base.With  just under 8000 securities of just under 5000 companies listed on the Bombay Stock Exchange this would  comfortably mean (even after making some allowance for overlapping) that there is a complaint of corporate fraud on stock exchanges against every second company listed !…Also looking at 2007 it would mean a fresh complaint is received every second working day by SEBI !

Mr Nair also stated that most of the frauds were taking  place by exploiting the skills acquired from information and communication technologies and therefore SEBI was planning to set up a committee of IT experts to develop some mechanism to curb such frauds

Moreover SEBI will shortly issue a directive for mandatory annual audit of all transactions by the Stock Exchange  

With such a workload and such mounting pressures like these I think one should stop using the dubious acronym for SEBI…that is stop saying SEBI stands for “Systematic Elimination of Brokers and Investors” .It may have a good reason for going slow

Think about it ! If the Exchanges were to suspend or delist all suspected Companies for Frauds committed then SEBI would have no listed companies to regulate and shareholders would be stuck with shares of such companies ! ?

Am I serious !? …Well…..?

Mr Nair,what is stopping SEBI from putting up the List and a small complaint brief of the Listed Companies under Investigation on it’s website with a user friendly Search feature?  Is not SEBI’s prime objective that of Investor Awareness and Protection ?

The potential Investor and minority shareholder has a right to all sensitive information about the company….Remember IFSL a few years ago…this company was under SEBI investigation for fradulent and accomodation profits.It had declared spectacular quarterly results stating they came from it’s new Alternative Energy Business when actually they were purely accomodation entries of stock market profits which SEBI knew about.Many top Financial Institutions and Brokerage Houses recommended this Indore Company at Rs 30 and themselves purchased lakhs of shares…a leading FII picked up lakhs of shares even on the day when SEBI issued an order against IFSL after market hours…Why could SEBI not have warned Investors of IFSL when it issued a show cause notice to the Promoters ?…by not doing so SEBI is actually abetting Insider Trading !…IFSL for a long time has been now at Rs 1 or Rs 2 to which it fell like nine pins after the order and Promoters saying they will not appeal…lower circuits for several days and no exit route for those who had purchased the shares ,which I suspect were offloaded by promoters themselves,who got away fairly scotfree while Investors lost a packet. read more

The Indo-US Nuke Treaty : Ask Just Two Questions

Why is India pushing for the Nuclear Agreement with USA ?

&

Why is USA pushing for the Nuclear Agreement with India ?

despite there being sizeable opposition in both countries to this Deal

Let’s address the first question.

India,clearly needs significant additional Power Generation to sustain it’s GDP growth for the next few decades.In fact from the current US $ I Trillion economy ,if India grows at 7% to 8% CAGR it will cross US $ 4 Trillion in the next 20 years.Any higher rate of growth will see it becoming a US $ 6 Trillion economy in this period !

‘Powering India—the road to 2017’, a report by global consultancy firm McKinsey states that India will need $600 billion to meet electricity demand that may triple to 3,35,000 mw by 2017 and it will face a huge shortage of power if it does not act now. 

India’s Hydel and Thermal Power Generation Capacities and those generated by Altrenative Sources like Wind and Solar would just not be enough to cope with an expected Power Demand

So what’s the opposition about ? ! Well for One it’s the way the UPA Government has gone about this whole process.Full Transperancy and Communication from Day One would have been a better idea.

A more compelling argument is that many believe that India will surrender some part of it’s sovereignty in that it will not be able to conduct further nuclear tests or it will risk facing stoppage of the supply of uranium which is the feed to the reactors.Australia,who holds 25% of the world’s uranium reserves, has already taken a  U turn as the Labour Party has come into power and stated that it will not supply any uranium to India as India had not signed the 1970 Nuclear Non Proliferation Treaty.The risk is that if supplies do stop there is very little “corrective measures” (Draft IAEA Agreement) that India can take to keep the reactors in operation….The Reactors would at best serve as gigantic storage Bins…like the silos that store Wheat!…and they would have cost India over US $ 40 billion to build

The arguments on higher creation costs (Nuclear :Rs 6 crores/MW against Thermal :Rs 4 crores/MW) and safety issues (Chernobyl Disaster in 1986 in Ukraine was more due to lack of safegaurds prescribed by IAEA and the Three Mile Island Leakage was controlled by conventional means) are less compelling.

Now let’s tackle the second question as to why USA is pushing for this deal.

Clearly USA benefits two fold with this deal. read more

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