et the Kotak MyTeam Card. Bm cnly now | STOCK MANIPULATION "bs On Insider Trading in Hathway Cable and Den Network before the Reliance deal. Will SEBI Investigate? Moneta! Tem mn 18 October 2018 fying a ora] or On 17th October, Reliance Industries Ltd (RIL) came out with its financial results for the second quarter (Q2) of FY18-19 results. However, more than the numbers, the buzz was created by its announcement of plan to acquire 66% stake in Den Networks and 51.30% stake in Hathway Cable, pap aie oe which will lead to consolidation in wired broadband space just like the telecom spaceBut what is interesting is some people may have known about this information and acted on it and pocketed huge gains. The price action of these two stocks before the announcement points to a ‘ R clear-cut case of insider trading. From the end of August, the scrips of Hathway Cable and Den Networks have risen a whopping 57% and 53%, respectively. That too when the Nifty is down 11% and the Small Cap index is down 21%. = There have been no developments on these stocks whatsoever, to warrant such dramatic rise. And how is it that these two completely different stocks rose at the same time in a market hit by bear hammering? The only common element is what came out later, which is RIL buying a controlling stake in both these companies. It is clear that a small group had the inside information of these deals that has led to these stocks rising in so much in a market going through a huge turmoil, where almost all stocks are down. Den Networks and Hathway Cable vs Small Cap Index a Sinise Eindtin' Ieee iio : oul sw | i. 1 1 | 7] EI a ZEEREEEEEEEEEEEEEEEEE EEE |[me seehecceasecdiegiaiiiiis Pggeesesseegghssearegagaa (Note: Values are indexed to 100) Insider trading is rampant in India. ‘This is not the first time, we have pointed out in insider trading in listed companies. However, in almost all cases, the response from market regulator, SEBI, was not up to the mark. In fact, in many cases, entities behind insider trading got away either with miniscule fine or through consent. We wrote about insider trading in Infosys Ltd in 2013 before the return of NR Narayan Murthy at the helm, then in Ranbaxy Lab in 2014 before it was acquired by Sun Pharma and many more. In case of Infosys, when the BSE Sensex was down 455 points on 31 May 2013, the company scrip ‘was up 3.32%, That too when its peers like Tata Consultancy Services (TCS) and HCL Technologies were flat. Next day, ie. on 1 June 2013, Infosys announced that its main founder Mr Murthy, who was on a retirement, would be returning to the company as executive chairman of the board and as an additional director for five years.{As a matter of perspective, this was the highest percentage decline in the Sensex in 14 months and [J w the highest rise for Infosys in one and half months, both happening on the same day! Clearly, ® someone knew that Mr Murthy was coming back and that many investors will see this as a positive fi development. There is a prima facie suspicion of insider trading. (Read: Someone knew Narayana Murthy is coming back and traded on it) wi In 2014, Sudhir Valia, executive director of Sun Pharma bet big in the scrips of Ranbaxy fa Laboratories it was bought for $4 billion by Sun. Over six trading days, prior to the announcement of its acquisition by Sun Pharma, shares of Ranbaxy had rallied 34%. According to information available on the BSE, Silverstreet Developers, a firm in which Mr Valia was one of the partners, were found buying stake in Ranbaxy since December quarter of 2013. Silverstreet Developers LLP's stake in Ranbaxy was 1.41% as on December 2013 end. The stake increased to 1.64% at the end of March 2014. And days after this, Sun Pharma announced the big takeover. (Read: Was Sun Pharma's Valia betting big on Ranbaxy? & Insider trading in Ranbaxy?) During the same year, there were massive volumes and a hefty price rise in ING Vysya scrip one | month before the Kotak Mahindra Bank merger deal. At the beginning of October 2014, the 1,000 ING Vysya shares were worth just 586 shares of Kotak Mahindra. This value went up marginally, T but soon dropped to 573 shares of Kotak Mahindra for 1,000 shares of ING Vysya. From then on, it OU! started gaining momentum, and reached up to 704 shares of Kotak Mahindra, as per the closing price on 20 November 2014, the date of the announcement. And what was the merger ratio? 725! (Read: Insider trading in ING Wysya stock?) I In July 2018, Moneylife wrote how directors and promoters of BK Birla group company Kesoram EI Industries may have allegedly indulged in large-scale insider trading in the process short-changing minority shareholders hundreds of crores. Mo As of 31 March 2015, Kesoram held 27.46 lakh shares of Century Textiles. On 22 March 2016, Kesoram sold all these shares to Camden Industries for Rs141 crore in a bulk deal. In FY17-18, Kesoram invested another Rs400 crore in Cygnet Industries, its wholly owned subsidiary. Cygnet Industries used this amount to buyback 27.46 lakh shares of Century Textiles from Camden Industries in three transactions on Sth, 11th and 12 December 2017; for Rs355 crore. Thus, it is alleged that Camden Industries made a clean profit of Rs214 crore. Then Cygnet Industries sold these 27.46 lakh shares of Century Textiles to Pilani Investments, a promoter entity of Kesoram, in two transactions on 7th and 14 June 2018, for Rs255 crore and in the process realised an allegedly loss of Rs100 crore. In this entire round tripping, Camden Industries allegedly made a profit of Rs214 crore but Kesoram shareholders lost Rs100 crore through Cygnet Industries. Also during FY15-16, Kesoram had through a slump sale, sold its spun pipes and chemical business to Camden Industries for Rs400 crore. These businesses were again bought back by Kesoram in FY17-18 for Rs422 crore.Kesoram, however, had denied that Camden Industries is a related party in terms of provisions of the Companies Act 2013 and SEBI Regulations 2015. (Read: Did Directors of Kesoram Industries Indulge in Insider ‘Trading and Short-change Minority Shareholders?) fvino 4 g User@ (Submit) 2 RealEstateDealStreet 2vears a0 ‘orruption snot onlin poltiesbutin the Indian corporate nner Editors picks Honey Gate 9 : Almost All Honey Consumed in India Is Adulterated with Sugar Syrup, .. Ni rej oul Mo ey |y a) Honey, tha protect us from dig Dilip Rath Is Qutof NDB, Varsha Joshi Appointed Interim Ch 12 Top Nationalised Banks Wrote Off Rs6.32 Lakh Crore in Y, @ th ap Pr va oulRI Rejects Muthoot Finance's Proposal To Acquire IDB! MF a Stock manipulation: Archit Organosys z Moneta Tem on 03 nuory 2018 fvinoa oon Archit Organosys, which manufactures chemicals, specialty derivatives and adhesives and sealants, Mc a claims to be of the leading chemicals companies in India, The surprising part is that, though the company’s website claims that it has maintained a steady growth and has ‘matured itself in capturing a major share in the market’ expanding to the US, Europe, Middle East across 50 countries, nowhere in its annual report or website is there a mention of clients’ names.Archit, which operated as Shri Chlochem Limited earlier, did not submit its shareholding pattern for Ee the June 2011 quarter and did not appoint a a whole-time secretary in 2003, according to Ni 68 523% www.watchoutinvestor.com. Shri Chlochem was fe suspended by the Bombay Stock Exchange in 2007 48 for not complying with its listing agreement. The suspension was later revoked. 28 The auditors, GK Choksi & Co gave a qualified 8 opinion on the FY16-17 accounts, for non-provision VJun-15, 1 Oct-16 1 0ct-17, of a liability of Rs1.5 crore that violated Accounting Standard 29 and also resulted in the understatement of current liabilities MN Sales fell 5% year-on-year (y-0-y), from Rs10.65 crore to Rs10.08 crore in the June 2017, and it 1 made a loss of Rs1.94 crore compared to a profit of Rs0.46 crore. The average sales for the past 10 gy, quarters have been Rs12.4 crore and the average net profit was Rs0.11 crore. Despite such poor results, the stock rose 478%, from Rs8.57 on 17 June '15 to Rs49.5 on 24 November '17. How the stock of a company with no growth and a qualified opinion on its financial statements shoot up so much? The regulators are not interested in finding out. fvino 4 EI Like this story Get our top stories nail be@abe.com susscrne 2 User@ What do you think?... Write your comments g Gurupad S Parsi 2yearsagoCongrats to ML team for creating awareness about manipulated company so that investors are protected Sel-hep the best remedy forregultors red signal is normaly ate Ny R syaeoty a RajSharma Syearsago Feel bad when the respectable magazine covers story citing a decade od issues. The reporter did't even bother to look at therecent Ni changes like te ongoing capex, to anagement putting 25Crofit's own capita through rights issue. think your reporter need to do beter jb to justiy his salary. re) rey oul ha