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Three promoters of beleaguered Bhushan Steel, who together own about 47 per cent in the company, are among those barred by the capital markets regulator for alleged manipulation of shares and laundering of unaccounted money.
Brij Bhushan Singal, Neeraj Singal and Ritu Singal are among the 108 named in the Securities and Exchange Board of India (Sebi) order on Radford Global. Sebi has banned 260 entities, including promoters and brokers, for manipulating the securities market to launder unaccounted money and to evade tax.
The market regulator on Friday passed two separate orders in the case of First Financial Services and Radford Global, the two listed entities used for manipulation.
The method involved issue of preferential shares to connected entities. Later, ahead of expiry of the one year lock-in, the companies announced a stock split to reduce the absolute value of shares and to increase liquidity. In the final leg of the operation, the entities' preferential allottees sold their shares to another set of connected entities to “rake in huge profits”.
“…Brij Bhushan Singal, Neeraj Singal, Ritu Singal and Uma Singal are connected to Radford and 1,900,000 shares (20.87 per cent of the total number allotted) were allotted to these four entities,” Sebi wholetime member Rajeev Agarwal said in an interim order issued on Friday.
An email sent to Bhushan Steel remained unanswered. Calls to company officials didn’t elicit a response.
“From the analysis of the trading across patches, it can be comfortably stated that the modus operandi of allotting shares on a preferential basis at a premium, pumping the share price artificially and then dumping the price so that the same cycle could be repeated, demonstrates the mala fides of the Radford group and suspected entities. Also, the mechanism is being presumably used to deceive the authorities by laundering black money and raking in tax-free profits,” said Agarwal’s order.
Shares of Bhushan Steel ended 0.8 per cent lower on Monday, at Rs 89.7. This is 80 per cent away from this year’s high and the company’s market capitalisation is now around Rs 2,000 crore. Sebi’s order is likely to compound the problems for debt-laden Bhushan Steel. In August, Neeraj Singal, the company’s vice-chairman and managing director, was arrested by the Central Bureau of Investigation in the Syndicate Bank bribery case. Bhushan Steel has a debt of nearly Rs 40,000 crore and yearly repayment obligations of a few thousand crores.
Earlier this year, the promoters had proposed to infuse equity capital. Bhushan Steel is also said to be exploring options such as a Qualified Institutional Placement.
