The Securities and Exchange Board of India(Sebi) has prima facie found that the preferential allotment of shares by Padmini Technologies to SBI Mutual Fund and Unit Trust of India (UTI) was in violation of the prescribed rules and regulations.
Sebi has also stated in its report to the Joint Parliamentary Committee that the company did not co-operate with the investigations and intentionally avoided furnishing records.
Padmini is also found to have violated the statutory time limit for transfer and despatch of shares. The transfer of shares and conversion of physical shares to demat form were not done in a sequential manner and many instances of out-of-turn transfers and dematerialisation of shares have been found, Sebi said.
Padmini had made a preferential allotment of 2 lakh shares on May 31, 1996, and 1.8 lakh shares on June 20, 1996, of Rs 10 each, to SBI MF and UTI, respectively.
Sebi has stated that the company had a diversified business and manufactured mineral water under the brand name--Florida. Later, the company changed its name to Padmini Technologies.
Once the stocks were allotted, the share price spurted immediately. Some of the shares allotted under the issue were delivered by entities associated to Ketan Parekh as part of their delivery obligations at the Bombay Stock Exchange.
"It appears that the share price of Padmini was manipulated to facilitate offloading of shares at higher prices," Sebi has stated.
Sebi has stated that SBI MF and SBI Fund Management were the major buying clients for Dhanki Securities, S S Kantilal Iswarlal Securities, K M Jain Stock Brokers, Rooshnil Securities, Pravin V Shah Stock Broking and Milan Mahendra Securities.
The purchases by the SBI arms were made when the stock price increased from Rs 212 to Rs 270 during settlement number 51/1999-2000 and from Rs 166 to Rs 209 during settlement number 1/2000-01.
Some of the brokers who made the purchases for SBI MF are known to be connected to Ketan Parekh, Sebi has said. During the enquiries, SBI MF stated that their decision to acquire shares of Padmini was taken pursuant to a presentation by the company to their fund manager which was subsequently approved by their investment committee.
SBI MF also stated that due to delay in transfer and demat of shares by the company, it took nearly 7-8 months for the shares acquired by them to be available for sale in the secondary market, Sebi has stated in its report to the JPC.
