Ongoing Akruti Squeeze Fiasco reflects all that’s wrong in our Stock Markets !

The Folly of allowing a Real Estate Company like Akruti trade in the F & O Segment despite a low floating stock of under 2% is now being realised….The Share Price has crossed Rs 2200 !….Nothing to do with Fundamentals though !

 I have covered Akruti in earlier Blogs on August 27,2008 and November 8,2008 warning of Increasing Company Debt and how easy it is for the Company to manipulate the share price when floating stock is so low

90% of the Equity is held by the Promoters and most of the rest by PAC….The company was borrowing unabashedly at high Interest rates recently….A group of speculators shorted this Company big time expecting loan payment defaults….This naked short is now being squeezed badly….Serves you right ,Bears !…you knew the risk when you shorted ! and so must face the consequences…..however the Bigger Issue remains ! How can you allow  F & O Trading in a Scrip which has a poor floating stock…..easy to manipulate the share price

In just days the Share Price has doubled as the bears got squeezed….NSE has put the Scrip in ‘Trade to Trade’ and removed it from the F & O Segment…All Open Positions,not squared off  will now compulsorily close out on March 26,2009…there will be no rollover…From January,Market Positions Limits had been reached and no new F & O position was allowed…only square-offs

SEBI Teams,two of them,have begun investigating Mumbai and Kolkata Brokers involved in this ongoing Drama

Just a last thought….hope Promoters have not masterminded all of this just to justify creation of this high price deliberately…to provide  comfortable cushion and no requirement to top up[ on loans taken or proposed to be taken against pledged shares

Those who have Akruti Shares must begin offloading at Rs 2200 +….The Squeeze will be tightened as March 26,2009 approaches…Offload your stock at every rise….There will come a day soon when the Game will be Over…The Share Price rise too will then be Over and reversal will set in !

By Allowing F & O Trading in Akruti,the regulators and exchanges showed lack of foresight and allowed this Squeeze Manipulation Drama to unfold,vitiating in no small measure the credibility of F & O Markets Operations.Clearly those that control the actual Stock are flexing their muscle here…their numbers are few…and that’s the problem…no floating stock…no trading depth…fewer players…easy to manipulate share prices and create abnormal movements quickly…facilitates Insider Trading read more

Akruti’s P R on a continuous Overkill Drive to Influence Buy Reports from Analysts

On August 27,2008 I had posted a blog on Akruti warning of High Incremental  Debts at reportedly high Interest rates…the Price then was Rs 840 and the Market Cap was Rs 5600 crs against a networth of under Rs 800 crs and Debt of Rs 626 crs as on March 31,2008…Debt that had since climbed close to Rs 1000 crs and reportedly sales were being booked on even Properties pledged for these loans

Share Price has dropped to Rs 650 and Market Cap is down,but still very High, at Rs 4300 crs

So it was with some amusement that I received an email yesterday from an outfit called Research Reality recommending Akruti…The email interestingly bore links to download three seperate Buy Reports from three different Broking Houses…two reports were dated Dec 2007 and Feb 2008 when the Share Price of Akruti was Rs 1000 to Rs 1200 while one was of October 2008 when the share price was Rs 700…all three project a price of Rs 1400 +….The current price is Rs 650

The latest Report feels more like Company Propoganda…perhaps sponsored by the company itself and planted on potential Investors ! ?…Nothing New really…It’s happens regularly in India and even all round the world 

Risk Factors stated are very muted and don’t raise the issue of High Current Debt and it’s Cost and the impact on earnings growth of the Project Delays,Depressed Liquidity and Falling House Price and Demand Scenarios unfolding

Also there is no mention of the nature and current value of land,building and shares pledged or placed as collateral with Lenders

The Broking House loves the scale of the 44 projects and  the 118 million saleable sq feet that Akruti is involved in currently constructing over the next 7-8 years.Their CAGR EPS projections from FY 2007-2010 are over 100%…with a huge burst in FY 2010  

The Reality is that the Realty Sector is simply unlikely to revive in the next year or two…in fact a Big Builder tells me the Real Estate prices even in Mumbai,that were holding till now, will now fall sharply as Diwali Demand was the last Straw that Buiders were grasping onto…and Demand Surge did not happen.

A recent Press Report spoke of SRA Schemes simply being abandoned as the cost to the Builder comes to Rs 4000/sq ft ,considering also the cost of providing  atleast 300 sq ft each to the slum dwellers…even after the additional FSI that is granted, the fall in Selling Price/Sq Ft has evaporated all the obscene profits that were visualised on the projects read more