November
29, 2005
PR No. 152/2005
ORDER IN THE MATTER OF KARUNA CABLES LTD.
Securities and Exchange Board of India (SEBI) vide order dated November 29, 2005 has issued the following directions in the matter of Karuna Cables Ltd.:
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The promoters of the company viz, Mahendra C. Shah, Hasu M Shah, Mit Shah, Akshat Shah, Kirti C. Shah, Jaswant C. Shah, Sanjay B Shah, Ceetee Trading and Leasing Pvt. Ltd and the non-executive independent directors of the company N. S. Rangnath, C. V. V. Prasad and Pavankumar Sanwarmal are hereby directed not to buy, sell or deal in securities of Karuna Cables Ltd, directly or indirectly, till further directions in this regard and Karuna Cables Ltd is further directed that it shall not issue any equity shares or any other instruments convertible into equity shares, in any manner, or shall not alter its capital structure in any manner, till further directions in this regard.
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The clients viz., Richtone Fintrade & Investment Pvt. Ltd., Vinayak Trimbak Sarkhot, Pradnya Sarkhot, Bipin Shah, Bhavana Bipin Shah, N. G. Builders & Developers, Narendrapal Gupta, Manju Gupta, Vijay Bhagwandas Shah and Vintel Securities Pvt Ltd are hereby directed not to buy, sell or deal in securities of Karuna Cables Ltd, directly or indirectly, till further directions in this regard.
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The clients Ritedeal Trading Company Pvt Ltd, Ajit Suryavanshi, Santosh Rohidas Jagtap, New Leader Trading Co. Pvt. Ltd., Ramdas Kshirsagar, Umesh Choukekar, Rightstar Trading Company Pvt. Ltd., Dattu Shitole, Amar Adhav, Rajkishore Singh, Santosh Pawar and Vijay Suryavanshi have already come to SEBI�s adverse notice in the cases of IFSL Ltd and Mega Corporation Ltd. and are hereby directed not to buy, sell or deal in any securities directly or indirectly, till further directions in this regard.
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The Stock Brokers viz. Galaxy Broking Ltd., Accord Capital Markets Ltd., B. Lodha Securities Ltd., CSL Stock Broking Pvt. Ltd., SVS Securities Pvt. Ltd. Indiabulls Securities Ltd., and Fortis Securities Ltd., are hereby directed not to buy, sell or deal in securities of Karuna Cables Ltd., directly or indirectly, for the entities mentioned in para a, b, & c till further directions in this regard.
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The Depositories shall not give effect to any transfer of shares of Karuna Cables Ltd. lying in the beneficial owner accounts of the entities mentioned in para a, b, & c.
All the above directions shall take effect immediately and shall be in force until further orders.
The above order has been passed by Shri G Anantharaman, Whole Time Member, SEBI in the following context:
Sudden spurt in price and trading volume of certain companies in a short period of time, often referred to as �mid cap� or �small cap� companies have been engaging the attention of SEBI and the stock exchanges for some time. Such trading has been under the surveillance of SEBI and the stock exchanges to determine whether the trading volumes and price rise have been the result of unfair trade practices or market manipulation. Karuna Cables Ltd. (the company) is one such �small cap� company whose shares witnessed a sharp price variation during the period February 10, 2005 to September 16, 2005.
The share price of the company went up from Rs. 22.4 on February 10, 2005 to Rs. 159.5 on September 16 2005 in 153 trading days representing a rise of 636%. The company had made a public issue during August 1996 and the shares of the company were listed at BSE on August 3, 1996. At the time of listing of shares on BSE, only 60,76,000 shares (48% of the issued shares) of the company were fully paid and remaining 66,95,800 (52 % of the issued shares) were partly paid. Out of the partly paid shares, the company converted 54,54,600 shares (43% of the issued shares) to fully paid shares during the year 2004-05, after a gap of almost 8-9 years. The shares of the company were also listed at the National Stock Exchange Ltd, however, the trading the scrip was suspended w.e.f. October 6, 1999 for non-compliance of listing agreement. As per the annexure to the Auditors� Report to the Annual Report for the year ending March 2004, the auditors have commented that the company is a Sick Industrial Companies within the meaning of Section 3(1)(o) of the Sick Industrial Companies (special Provisions) Act, 1985 and the company is continuing to be a sick company since the carry forward losses are there. As per the Profit and Loss statement as on March 31, 2005 the company has shown a net profit of Rs 67.61 lakhs, however, the company is still carrying forward huge accumulated loss to the tune or Rs 4.05 crores in their Balance Sheet.
The preliminary analysis revealed that:
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a) |
Considering that the allotment of shares was made to the multiple entitles having the same address it appears that these shares were allotted to benami or fictitious entities. |
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b) |
Partly paid shares were converted to fully paid shares after a gap of 8-9 years, and that too without receiving the allotment money at the time of conversion of partly paid shares to fully paid shares. |
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c) |
The company made wrong and misleading disclosure of promoter�s holding in the company to BSE. |
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d) |
The entities connected to the promoters rematerialized large quantity of shares of the company possibility to circulate and offload their holding without getting detected or to avoid audit trail. |
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e) |
There was absence of wide spread investor interest in the share of the company since June 2000 to January 2005, followed by sudden increase in share price and volume since February 2005, |
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f) |
The company made misleading and premature corporate announcements (such as receipt of big orders of Rs 48.70 million from Central Distribution Power Ltd (CPDCL) and then cancellation of this order) to BSE. |
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g) |
The promoters, the entities connected to them and interconnected entities indulged in large number of off-market deals, who in turn dealt heavily in the market and thereby contributed to the sudden rise in trading volumes and the corresponding price rise. |
The above findings clearly indicate a careful designing and orchestrated execution of a plan by the promoters, to make personal gains at the expense of investors by enticing them to participate in the trading of the shares of the company and with a view to offload their holdings which were not disclosed as part of promoter�s holding, as it seems.
The above developments in the share of the company warranted an immediate inquiry in to the dealings in the shares. While the inquiry is in progress, based on findings of the preliminary inquiry, SEBI has issued the above directions.
Mumbai
November 29, 2005
For full copy of order against ACCORD CAPITAL MARKETS LTD., click here.
For full copy of order against ACCORD CAPITAL MARKETS LTD., click here.
For full copy of order against AJIT SAMBHAJI SURYAVANSHI, click here.
For full copy of order against AKSHAT SHAH, click here.
For full copy of order against AMAR YUVRAJ ADHAV, click here.
For full copy of order against B.LODHA SECURITIES LTD., click here.
For full copy of order against BHAVANA BIPIN SHAH, click here.
For full copy of order against BIPIN SHAH, click here.
For full copy of order against C.V.V.PRASAD, click here.
For full copy of order against CEETEE TRADING & LEASING PVT.LTD., click here.
For full copy of order against CSL STOCK BROKING PVT.LTD., click here.
For full copy of order against DATTU SHITOLE, click here.
For full copy of order against FORTIS SECURITIES LTD., click here.
For full copy of order against FORTIS SECURITIES LTD., click here.
For full copy of order against FORTIS SECURITIES LTD., click here.
For full copy of order against GALAXY BROKING LTD., click here.
For full copy of order against HASU M.SHAH, click here.
For full copy of order against INDIABULLS SECURITIES LTD., click here.
For full copy of order against INDIABULLS SECURITIES LTD., click here.
For full copy of order against JASWANT C.SHAH, click here.
For full copy of order against KARUNA CABLES LTD., click here.
For full copy of order against KIRTI C.SHAH, click here.
For full copy of order against MAHENDRA C.SHAH, click here.
For full copy of order against MANJU GUPTA, click here.
For full copy of order against MIT SHAH, click here.
For full copy of order against N.G.BUILDERS & DEVELOPERS, click here.
For full copy of order against N.S.RANGNATH, click here.
For full copy of order against NARENDRAPAL GUPTA, click here.
For full copy of order against NEWLEADER TRADING CO.PVT.LTD., click here.
For full copy of order against PAVANKUMAR SANWARMAL, click here.
For full copy of order against PRADNYA SARKHOT, click here.
For full copy of order against RAJ KISHOR SINGH, click here.
For full copy of order against RAMDAS KSHIRSAGAR, click here.
For full copy of order against RICHTONE FINTRADE & INVESTMENT PVT.LTD., click here.
For full copy of order against RIGHTSTAR TRADING CO.PVT.LTD., click here.
For full copy of order against RITEDEAL TRADING CO.PVT.LTD., click here.
For full copy of order against SANJAY B.SHAH, click here.
For full copy of order against SANTOSH KRISHNA PAWAR, click here.
For full copy of order against SANTOSH ROHIDAS JAGTAP, click here.
For full copy of order against SVS SECURITIES PVT.LTD., click here.
For full copy of order against SVS SECURITIES PVT.LTD., click here.
For full copy of order against SVS SECURITIES PVT.LTD., click here.
For full copy of order against UMESH B.CHOUKEKAR, click here.
For full copy of order against VIJAY BHAGWANDAS SHAH, click here.
For full copy of order against VIJAY S.SURYAVANSHI, click here.
For full copy of order against VINAYAK TRIMBAK SARKHOT, click here.
For full copy of order against VINTEL SECURITIES PVT.LTD., click here.
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