Capital markets regulator, Securities and Exchange Board of India (Sebi) has passed a consent order in the Nissan Copper (NCL) matter after noticing an abnormal price rise in the shares of the company on the listing day in December 2006.
The order mandates the two exchanges — BSE and NSE — to transfer Rs 9,52,90,137.90 and the interest accrued till the transfer date, to Sebi.
In January last year, Sebi had passed an ex-parte order directing the exchanges to withhold the profits of the applicants (Rajeev Reniwal, Haryana ship-breakers, Sanjeev Reniwal HUF, Shanti Sarup Reniwal, Shanti Sarup Reniwal—HUF and Inducto Steel) in a separate escrow account.
The regulator had also barred the six brokerages, including Religare Securities, Dimensional Securities and Matrix Equitrade from dealing in the shares of Nissan Copper, even as it unearthed the re-emergence of multiple applications in the Nissan Copper IPO.
In subsequent investigations, Sebi found that the applicants and counterparties had colluded in arranging for subscription from foreign institutional investors (FIIs) in the qualified institutional buyer (QIB) portion of NCL’s initial public offer (IPO). After listing, the applicants and other counterparties would provide an assured exit to the FII at a pre-determined price by entering into structured transactions.
According to the order, which was passed by Sebi wholetime members TC Nair and MS Sahoo, “this act of the applicants appears to have distorted the market prices and the applicants seem to have benefitted from this.”
In its January 2007 directive, Sebi had pointed out instances of multiple applications in NCL’s IPO. The list of retail allottees revealed 303 entities having the surname “Bhansali”. Of these, 288 entities gave five different Ahmedabad-based addresses. Of the 288 allottees, 53 did not give any PAN details.
Similarly, Vinod Kumar Goyal, the firm’s plant manager who drew an annual salary of only Rs 1.68 lakh, received an allotment of 3 lakh shares in the employees’ category. He subsequently transferred these shares to Forney Fund Advisors through off-market transactions.
Sebi had issued a showcause notice against all the applicants in November under Sections 11(4) and 11B of the Sebi Act, 1992. Subsequently, the applicants proposed that the matter be settled through a consent order.
The company floated its IPO at an issue price of Rs 39 a share in December 2006 and thereafter saw its shares rising by an astronomical 235 per cent to the issue price.
