SEBI probes large-scale manipulation in stocks by brokers, others
New Delhi, Feb 18:
A large number of 'pump-and-dump' activities in stocks has come under the scanner of market regulator SEBI, which suspects certain brokers and other entities of luring small investors into artificially high trade volumes.
The surge in these manipulative activities, known as 'pump-and-dump' in market parlance as they involve sudden sale of shares after creating huge volumes with significant buying activities, has been noticed by SEBI's Data Warehousing and Business Intelligence System (DWBIS).
The system has now begun providing "pattern recognition algorithms" to monitor the trade and order data received by SEBI to identify networked clients who possibly collectively indulge in violations of securities laws.
A senior official said that alerts of high materiality are being generated by the DWBIS, pursuant to which SEBI has detected possible market violations through activities such as pump-and-dump, insider trading and front running.
The pump-and-dump cases have been found to be quite frequent in certain mid-cap stocks, especially from the infrastructure sector, he added.
These stocks are mostly of those companies that have been in news for problems relating to their funding plans, the official said, but did not specify the names.
The modus operandi generally starts with huge buy orders alongside circulation of positive news about resolution of long-pending problems at those companies, followed by large-scale sale of the same shares at a later stage, he said.
Besides detecting the possible cases of market manipulation, SEBI's DWBIS tools are also helping it to build linkages between various transactions and activities of the networked entities.
The official said that DWBIS is providing SEBI with a capability to query and perform analytics on vast amounts of data and obtain the desired output in a timely manner.
SEBI has so far implemented two phases of the ambitious DWBIS project and the third phase is currently being tested for live implementation and the tools available in this system are proving very useful in catching the manipulators at an early stage, the official said.
The first phase was implemented in early 2011 for speedy analysis of data and identification of possible violations by use of modern technology in terms of computation.
The third phase would help SEBI meet data requirements of its research department. This phase would incorporate in-house and outside data related for research purposes, such as financials of companies, transactions, primary market data, mutual funds, corporate actions, takeover and buyback informationCourt vacates stay on Dunlop winding up order
The creditors, to whom Dunlop reportedly owes more than Rs 300 crore, had moved winding up petition after repeated failures by the company in clearing of dues.
Kolkata, Feb 18:
The Calcutta High Court on Monday directed the official liquidator to take 'immediate possession' of the assets of Dunlop India. The Division Bench also vacated an interim stay order on winding up of the company.
The order was passed by a Division Bench of Justices A.K. Banerjee and S.K. Sinha.
Dunlop has facilities in Sahagunj in West Bengal and Ambattur in Chennai. Neither of these is in operation.
As per the Court order, though the official liquidator will take possession of assets, he will not have the right to sell them. Police authorities in West Bengal and Tamil Nadu have been asked to render all possible help to the official liquidator. When contacted a Dunlop India official said the company was yet to receive a copy of the Court order.
A Single Bench of the Calcutta High Court had ordered the winding up of Dunlop on January 31 based on a petition filed by a group of creditors seeking liquidation of the company over non-payment of dues.
On February 4, Dunlop had moved a Division Bench seeking a stay on the winding up order. The Bench of Justices Girish Gupta and Tarun Kumar Das had then directed the company to deposit Rs 10 crore before their petition for a stay on the winding-up order is heard.
Dunlop India had deposited the amount on February 9.
Pay more upfront, and get 12-15% discount on flats
Mumbai, Feb. 18:
Mumbai real estate developers have become more open to negotiation and are increasingly willing to reduce prices substantially in favour of sizeable up-front payments, according to global property consultant Knight Frank.
"The catalogue price still stays. However, unlike earlier, where discounts were no more than five per cent for significant upfront payment, today it is between 12-15 per cent. This is more in the premium segment. The discounts are higher in the middle and lower segments," said Samantak Das, Director – Research, Knight Frank.
The number of cancellations has also been increasing over the last few quarters. This is symptomatic of a wary investor segment which is fast losing faith in the current scenario where developers are hard pressed to even service their debt obligations, a report from the consultancy said. Investors form about 25-30 per cent of the market demand and are said to be offloading their holdings.
Unsold inventory
Knight Frank said the Mumbai market has about 83,000 units of unsold residential inventory, which is about 39 per cent of units under construction. Going by the average absorption rate of the preceding eight quarters, this number translates to about six quarters worth of unsold stock inventory at the end of 2012. Of the unsold stock, 49 per cent are units launched in the Rs 2 crore and above price range.
"The fact that real estate prices are showing signs of weakening suggests that the long-standing stalemate between buyers and builders is finally turning in the buyers' favour," Das said.
The increase in inventories coupled with stagnating absorption levels were bound to put further pressure on the prices. The rise in interest cost for the realty sector and decline in net profits during 2012 compared to the previous period was likely to compel developers to lighten unsold inventory levels and de-leverage their balance sheets.
Tapping buyers
With demand likely to remain subdued as the market continues to bottom out in the backdrop of a sluggish economy, he felt that a more pronounced rationalisation of prices was warranted in 2013.
The report says developers are looking to tap into the largest chunk of buyers looking for apartments priced up to Rs 75 lakh as an estimated 64 per cent of units under construction today are targeted at this price bracket. The share of the peripheral suburbs has jumped from 21 per cent in 2011 to 28 per cent in 2012 and has led to a proportionate spurt in the number of units launched in the Rs 25 - 50 lakh bracket that has grown from 29 per cent to 36 per cent in 2012.
The central suburban corridor from Sion in the Central Suburbs up to Badlapur in the peripheral central suburbs saw the maximum launches in 2012 and consequently had the highest unsold inventory. About 35 per cent of launches in 2013 will be in these micro-markets, which is likely to put further pressure on unsold stock and prices there. Further, the peripheral markets attract a lot of investor interest due to the lower ticket sizes and the promise of superior returns. Here, the investors' segment has been seen offloading their holdings, adding a significant shadow supply in the market, the report added.
The muscle of minority shareholders
Approval of two-thirds minority shareholders should be called for only in specific cases.
February 18, 2013:
In the recent past, there have been a number of articles and protests against corporate actions such as the royalty proposal by MNCs and mergers.
Higher levels of shareholder activism and newly formed forums for protection of minority shareholders are the prime drivers of these actions. While many of the issues relate to MNCs, there were also a few relating to Indian business houses. However, the most far-reaching development in this regard is the February 4 Securities and Exchange Board of India (SEBI) circular.
The purpose of this article is not to judge the justification, or lack of it, for protests on specific issues. It is important to examine the larger issue of balancing the interests of minority and majority shareholders. While protecting the interest of minority shareholders is important, denying the majority shareholders their rights is also unfair.
The circular lays down a new process for mergers, demergers and arrangements. It applies to all corporate actions of listed companies under Sections 391 to 394 of the Companies Act 1956. According to it, any proposal falling under the above sections will require two-thirds minority shareholders' approval.
In addition, the circular lays down the procedures and processes to be followed with the stock exchanges before the application to a high court, as envisaged by the Companies Act, is filed by the listed companies.
Intention
As stated in the preamble, the intention of the circular is to protect minority shareholders. In trying to achieve this, the SEBI has ended up depriving majority shareholders of their right to vote on all arrangements falling under Sections 391 to 394 of the Companies Act. One may argue for such a restriction if the proposed arrangement results in financial advantage to majority shareholders, or the arrangements are with other group companies of the majority shareholders.
To impose such a restriction even in the case of a merger with an independent company in which majority shareholders don't have any financial interest is unfair to them.
Also, such a restriction can be misused by competitors by blocking a good business proposal. In a company where majority shareholders control 75 per cent, a competitor with 9 per cent of the shares can block a business proposal. Further, this circular equates management (which evaluates and recommends the proposal for arrangements falling under this section) with majority shareholders, which may not always be true.
One, however, realises e the need for protecting minority shareholders in situations where a proposal benefits majority shareholders.
Hence, a fairer way to protect the interest of both would be to have a regulation that applies only to arrangements in which majority shareholders are interested.
The concept of restricting the interested parties from voting is a well-established practice and also finds a place in the Companies Act. For example, according to Section 300, directors are not permitted to vote on resolutions in which they are interested.
The SEBI should re-evaluate its circular and make it applicable only to arrangements which benefit majority shareholders by way of higher shareholding, payments, or all arrangements with majority shareholders' group companies.
Voting method
For this purpose, a declaration from majority shareholders could be obtained and be made part of the process to be followed. Another controversial provision in this circular is the method of voting. The circular specifies postal ballet, whereas the Companies Act specifies voting at a shareholders' meeting to be held under the direction of a high court. Even under the new proposed Companies Act, voting on such resolutions has to be at a shareholders' meeting.
For the smooth functioning of companies, regulators should avoid such contradictions.
(The author is former CFO, Akzo Nobel India Ltd)
Taxing super-rich could be counter-productive: Aditya Puri
"If you are charging the super-rich more, they know how to do their tax planning and you only lead to an evasion," says Aditya Puri.
Mumbai, Feb 18:
HDFC Bank Managing Director, Aditya Puri today said the idea of taxing the super rich could prove counter-productive and lead to evasions.
"If you go back in the last 50 years, in any country, it has proved counter-productive. If you are charging the super-rich more, they know how to do their tax planning and you only lead to an evasion," he said on the sidelines of a co-branded credit card, targeting the youth, launched by HDFC Bank and Times Card.
The Finance Minister P Chidambaram had last month said that "when the economy requires, government requires more resources, the very rich willingly should pay a little more".
The comments had stirred up a debate making investors looking for a stable tax regime uneasy.
Clarifying that he is neither against the move and nor supporting it, Puri said though it was "a good political move it does not serve any purpose".
Asked for his expectations from the Union Budget to be presented on February 28, Puri said one should be happy if Chidambaram delivers on whatever he has been promising lately.
"I would be very happy if Chidambaram is able to produce what he says is going to produce," Puri said, adding that he would watch out for areas like fiscal deficit, arresting subsidy burden and steps to revive investors' sentiment in the budget.
In a bid to woo global investors, Chidambaram had done a series of road shows in the financial centres like Hong Kong, Singapore and Frankfurt affirming the government's commitment to the reform process and resolve to stick to the road map of fiscal consolidation.
Puri informed that HDFC Bank is the largest player in the credit cards business, commanding a 35 per cent market share, and its portfolio stands at Rs 10,000 crore, the largest in the industry__._,_.___
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