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Sebi shells St with curbs on 331 firms

DNMUM394141 | 8/9/2017 | Author : Sumit Moitra | WC :463

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Puts severe trading restrictions; list includes known names such as Parsvnath, Prakash Ind; companies deny charge

Kolkata: In a major jolt to the corporate sector, capital markets regulator Securities and Exchange Board of India (Sebi) on Tuesday suspended daily trading in about 331 listed entities on the suspicion of being shell companies.
These companies include Parsvnath Developers, J Kumar Infraprojects, Orissa Sponge Iron and Steel, Birla Cotsyn, Prakash Industries and SQS India BFSI Ltd.
These 331 companies have been put under the strictest level of Graded Surveillance Measures, grade 6.
“Trading in all such listed securities shall be placed in Stage VI of GSM with immediate effect. Under the stage VI of GSM framework, trading in these identified securities shall be permitted only once a month under trade-to-trade category. Further, any upward price movement in these securities shall not be permitted beyond the last traded price and additional surveillance deposit of 200% of trade value shall be collected from the buyers which shall be retained with exchanges for a period of five months,” the circular issued by BSE following Sebi’s letter on Monday said.
Apart from trading restrictions, exchanges would now start a process of verifying the fundamentals of these companies.
“Exchanges shall appoint an independent auditor to conduct an audit of such listed companies and if necessary, even conduct a forensic audit of these companies to verify its credentials,” the circular said.
The Sebi directive said shares held by the promoters and directors of such companies shall be allowed to be transferred by depositories only upon verification by exchanges.
On verification, if “appropriate credentials/fundamentals” are not found about the existence of the company, exchanges must initiate compulsory delisting of such companies, it said.
While the market reacted negatively to the news, there was mixed response to this sudden initiative.
But for every notorious corporate group found on the list like the Winsome Diamond or Rei Agro, there are several working manufacturing groups like Pincon Spirit or Adhunik Industries.
“We are having six own manufacturing units in the liquor vertical, we are paying government excise duties ranging in crores for running the business,” Pincon Spirit CFO Arup Thakur said in a statement.
“Our company is definitely not a shell company. We plan to write to Sebi on this and would be able to comment further after we get clarifications,” Ankit Patni, director of Rohit Ferro said.
While Pincon Spirit has earned a revenue of Rs 390 crore and profit of Rs 12 crore during the June quarter, indicating it’s not a shell company, Rohit Ferro could manage a topline of Rs 260 crore during the March quarter.
“If some of the firms are found to be not shell companies this order shall still be a death knell on their perception and valuation,” Rajesh Narain Gupta, managing partner, SNG & Partners said.

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