The stock of the recently-listed company Shekhawati Poly-Yarn has come under the scanner of the Securities and Exchange Board of India (Sebi), as an unusual volatility was seen in the price after its debut. In just two trading sessions after it was listed, the stock has seen a near two-fold rise, as well as a 45 per cent downward price movement.
A source with Sebi said concerns raised over the Shekhawati listing have received attention and the regulator is studying the pattern.
On Wednesday, the stock made a debut on the National Stock Exchange (NSE) with a 66.66 per cent premium at Rs 50 against the initial public offer price of Rs 30. However, on the Bombay Stock Exchange (BSE), the counter saw a modest opening at Rs 8.33 per cent above its issue price and rose to a high of Rs 69 on the same day. The company had raised Rs 36 crore in the IPO last month.
Operators are able to easily rig the price of small company IPOs on the first day of listing with ease as there is not much liquidity and circuit filters. According to stock brokers, circular trading in the company was so high that 225 million shares were traded on BSE and NSE on the first day of listing against 10.2 million shares that were offered. On the BSE, over 100 different entities, mainly arbitragers, were involved in bulk deal transactions.
Interestingly, the stock has seen a sharp fall from its high. In just two trading sessions, it fell 44 per cent from its high. It was locked in a lower circuit of 20 per cent on BSE today as operators were seen exiting the counter. The stock was last traded at Rs 38.05.
The company is engaged in manufacturing of texturised and twisted yarn. The company proposes to commence manufacturing of knitted fabric from texturised yarn. The proceeds of the IPO will be used for buying 30 new twisting machines and installation of 30 new knitting machines.
The company will also use the IPO proceeds for buying a corporate office at an estimated cost of Rs 3.25 crore and for working capital requirements. Its net profit jumped 87.3 per cent to Rs 2.21 crore on a 15.1 per cent increase in net sales to Rs 89.37 crore in the year ended March 2010 over the year ended March 2009.