Synopsis: The SEBI order noted that these trades served as a scam on investors by creating a false appearance of trading in the securities market and by encouraging demand (buy) and thus the price of the scrip. This is the second time in a month that an order banning Yash Birla from entering the stock market has been issued by SEBI.
Yashovardhan Birla, Chairman of the Yash Birla Group, has been suspended from the stock market by SEBI, twice in just a month.
In a recent order, the capital markets regulator said that during July 7-15, 2011, Yash Birla and nine other individuals were barred from accessing or transacting in the securities market for a period of two years in the Birla Pacific Medspa Ltd (BPML).
It is alleged that on July 07, 2011, BPML transferred Rs 7 crore each to entities called Sanjukta Vanijya Pvt Ltd and Darshan Tradelink Pvt Ltd as pass-through entities from IPO proceeds, which were then advanced to net buyers on the day of listing, namely Jalan Cement Works Ltd (Rs 3 crore), Marutinandan Infosolutions Pvt Ltd (Rs 2.29 crore), Orbit Financial Consultants Pvt Ltd (Rs 2 core) and Rupak Tradi Works Ltd (Rs 3 crore).
Together, on July 7, 2011, these four entities paid Rs 12.52 crore to their broker GRD Securities against their pay-in obligation on listing day against purchase trades in the BPML.
After receiving funds from BPML’s IPO proceeds, the four net buyers acquired a net of 67,11,242 shares (value of about Rs 9.29 crore) — 21.56% of the total quantity of 3,11,08,577 shares delivered on July 07, 2011 and 10.3% of the size of the issue.
The investigation found that the buyer companies, namely Jalan Cement, Rupak Trading, Orbit, and Marutinandan, were artificial buyers of BPML shares financed by the BPML, in breach of the fair market principles where the price of a scrip is to be determined on demand and supply.
It is alleged that BPML transferred the IPO funds to the above-mentioned four entities that eventually traded in the scrip with the help of funds obtained from BPML for providing purchasing support in violation of the principles of the Fair Market Principle, and thus the act alleged to be fraudulent by BPML and its directors that resulted in the fraud of BPML investors.
The SEBI order noted that these trades served as a scam on investors by creating a false appearance of trading in the securities market and by encouraging demand (buy) and thus the price of the scrip.
This is the second time in a month that an order banning Yash Birla from entering the stock market has been issued by SEBI.
On 29 September, the Securities and Exchange Board of India (SEBI) barred four entities, including Birla, from the markets in relation to Birla Cotsyn (India) Ltd’s manipulation of the issuance of global depository receipts (GDR) back in 2010.
Under the Insolvency and Bankruptcy Code (IBC), Birla Cotsyn (India) Ltd (BCIL) is currently undergoing liquidation proceedings. P.V.R. Murthy, Y.P. Trivedi and Mohandas Adige are the other persons barred from the securities market.
Yashovardhan Birla, also the Director of Birla Surya Ltd, was declared a wilful defaulter last year by UCO Bank after the company failed to repay loans of Rs 67.65 crore.