December 15, 2005
PR No. 159/2005


Securities and Exchange Board of India (SEBI) vide order dated December 15, 2005 has issued the following directions in the matter of Yes Bank Ltd. (YBL):
The following entities are directed not to buy, sell or deal in the shares of Yes Bank Ltd. and in other ensuing IPOs, directly or indirectly, till further directions:

  1. Ms. Roopalben Nareshbhai Panchal

  2. Devangi Dipakbhai Panchal

  3. Seer Finlease P.Ltd.

  4. Excell Multitech Ltd.

  5. Zenet Software Ltd.

  6. Tauras Infosys Ltd.

  7. Rajan Vasudev Dapki

  8. Barghav Panchal (HUF)

  9. Jayantilal Jitmal

  10. Sugandh Estates and Investments Pvt. Ltd.

  11. Sujal Leasing and Finance P Ltd.

  12. Ritaben R Thakkar

  13. Veenaben Y Thakkar

NSDL is directed to ensure that the 6315 dematerialized accounts which served as conduit for Roopalben Panchal and the 1315 dematerialized accounts which served as conduit for Sugandh are not utilized for manipulation of IPO allotment in future.
NSDL is directed to undertake a comprehensive inspection of Karvy Stockbroking Ltd. (�Karvy - DP�) particularly focusing on the sytems and procedures, if any, put in place by Karvy-DP for implementing the �know your client� norms that DPs are required to follow. NSDL shall identify the deficiencies in Karvy-DP with regard to the above and also ascertain from Karvy-DP the particulars of other potential benami accounts more particularly those multiple accounts having the same contact address and / or having the same person / entity authorized to operate these dematerialized accounts. Karvy-DP is directed to fully co-operate with NSDL in the above inspection. NSDL shall submit a report to SEBI detailing the findings of its inspection in a time-bound programme.
NSDL and CDSL are advised to enhance their surveillance and also devise and put in place systems and procedures for identifying multiple dematerialized accounts of suspicious nature and reporting the same to SEBI, as expeditiously as possible.
Reference is being made to the Reserve Bank of India to examine the role of Bharat Overseas Bank and Vijaya Bank in opening the bank accounts of these benami entities and funding their IPO applications. The major stock exchanges viz. BSE and NSE and the depositories viz. NSDL and CDSL are directed to ensure that all the above directions are strictly enforced.
The issue of alleged manipulations in Initial Public Offerings (IPOs) of various companies has been engaging the attention of SEBI for some time. SEBI has also been receiving information regarding alleged abuse of IPO allotment process. In view of the above, the surveillance department of SEBI advised the stock exchanges to examine trading during the period immediately prior to listing and immediately upon commencement of trading in the stock exchanges in respect of certain companies that had come out with IPO in the recent past. Yes Bank Ltd. (�YBL�) was one such company that had come out with an IPO in the recent past.As sought by SEBI, during October 2005, Bombay Stock Exchange (�BSE�) submitted an analysis of off market transactions in the shares of YBL during the pre-listing period. 
The IPO of YBL opened on June 15, 2005 and its shares were listed on the Stock Exchanges, namely BSE and NSE on July 12, 2005. It was observed that one Ms. Roopalben Nareshbhai Panchal had transferred 9,31,600 shares to various entities in seven off market transactions on July 11, 2005 i.e. prior to the listing and commencement of trading on the Stock Exchanges. In order to get an allotment of 9,31,600 shares, Ms. Roopalben Panchal would have had to apply for crores of shares involving many crores of rupees in application money . It was observed that Roopalben Panchal�s name did not appear in the list of top 100 public issue allotees. In view of the above it was suspected that Ms. Roopalben Panchal must have made multiple applications to be allotted 9,31,600 shares or that other applicants acting as a front for Ms. Roopalben Panchal may have applied on her behalf but in their own name. Initial probe by SEBI revealed the following points:
The retail portion of the YBL IPO was oversubscribed by 9.96 times and the non-institutional portion was oversubscribed by 43.68 times. The shares were credited to the allottees on July 5, 2005. The shares of YBL were listed on stock exchanges on July 12, 2005. In the IPO of YBL, Roopalben Panchal had applied for 1050 shares paying the application money of Rs.47,250/- Apparently she did not receive any allotment in the IPO. On July 6, 2005, Roopalben Panchal received 150 shares each from 6315 allottees through off-market transactions. Thus she received 9,47,250 shares in aggregate.
Curiously, as per the dematerialized account data furnished by NSDL, out of the above 6315 entities as many as 6221 entities have their address as 402-403 Shashwat Opp. Gujarat College Ellisbridge Ahmedabad -380006. The above address is the same as that of Devangi Dipakbhai Panchal (sister of Roopalben Panchal) with whom Roopalben Panchal holds joint dematerialized account. 50 entities out of the above 6315 entities have their addresses as 34 Khetan Tower, Camp Road, Shahibaug, Ahmedabad 380004. 44 entities out of 6315 entities have their addresses as 1201/68 Samast B Soc Pinakin Soc Paldi, Ahmedabad- 380007. Also, strangely, all the 6315 entities have their bank accounts with Bharat Overseas Bank Ltd. and demat accounts with Karvy-DP. Copies of the application forms of 20 randomly selected entities out of the above 6315 entities, was examined. It was seen that all these 20 applicants had furnished their addresses as Bharat Overseas Bank Ltd., Century Staff Building, Pandurang Bhudkar Marg, Worli, Mumbai � 400030. The above address is the same as that furnished by Roopalben Panchal and Devangiben Panchal in their respective application forms.The above facts cast doubts as to the genuineness of the 6315 applicants. It appears that Ms Roopalben Panchal has made all the applications in fictitious names or she has used the other applicants as benamis for her application. 
The number of shares allotted to applicants in a particular category is determined by the total number of shares applied for in that category. In order to maximize the possibility of getting allotment, all these 6315 applicants acting together would necessarily need to apply in the same category. It is seen from a random sample of 20 applications that this was indeed the case. All these applicants and also Roopalben Panchal and Devangiben Panchal have applied for 1050 shares each paying application money of 47,250/- each.
By applying for the maximum possible number of shares per applicant while being categorized as retail applicant and by putting in large number of applications in the lot of 1050 shares, Roopalben Panchal and her associates (real or fictitious) have attempted to corner the maximum possible number of shares in the IPO allotment. This tanamounts to an abuse of IPO allotment process.
Immediately upon receiving the IPO allotment on July 5, 2005, these 6315 IPO allottees made off-market transfer of these shares on July 6, 2005 to the dematerialized account of Roopalben Panchal held jointly with Devangiben Panchal and Dipakbhai Jashvantlal Panchal. This gives rise to the prima facie view that these entities were just lending names for Roopalben Panchal and her associates.
Subsequent to receipt of shares as above, on July 11, 2005 Roopalben Panchal transferred 7,61,600 shares to six entities namely Seer Finlease P.Ltd. (3,32,875 shares), Excell Multitech Ltd. (1,61,180 shares), Devangi Dipakbhai Panchal (2,20,000 shares), Zenet Software Ltd. (92,855 shares), Tauras Infosys Ltd. (80,590 shares) and Rajan Vasudev Dapki (44,100 shares) through off-market transactions. 
On July 12, 2005 i.e. the date of listing on stock exchanges, the above five entities (other than Rajan Vasudev Dapki) together sold 8,39,500 shares valuing Rs.5.15 crores. The average sale price works out to Rs.61.40 per share. Reckoning the issue price of Rs.45/- per share, the total profit earned by the five entities on sale of 8,39,500 shares works out to Rs. 1,37,67,800/-.
A similar modus operandi as above has been adopted by Sugandh who received 150 shares each from 1315 dematerialized accounts aggregating to 197250 shares in off market transactions. It in turn had, on July 08, 2005 transferred 196050 shares to the dematerialized account of 3 entities Sujal Leasing and Finance P. Ltd., Ritaben R Thakkar and Veenaben Y Thakkar. The above three entities sold 1,94,250 shares at an average sale price of Rs.61.61 per share on NSE for a total sale value of Rs. 1,19,68,708.45. The total profit earned by the three entities on sale of 1,94,250 shares works out to Rs. 32,26,492.50 reckoning the issue price of Rs.45/- as cost of acquisition of these shares.
It appears that the above profit has been earned by abusing the IPO allotment process and cornering the shares meant for the retail applicants. It appears that Roopalben Panchal, Sugandh and their respective associates have adopted the modus operandi of making applications in fictitious / benami names for cornering the retail of portion of IPO shares. The shares allotted in IPO to the benamis of Roopalben Panchal and Sugandh would have otherwise gone to genuine retail applicants. 
Further probe is required for examining the systemic fault, if any, of the registrar Karvy-RTI i.e. Karvy Computershares P Ltd. and the lead managers DSP Merrill Lynch Ltd. and Enam Financial Consultants P Ltd. in identifying and weeding out the benami applications. Also, the role of Karvy-DP that opened the dematerialized accounts of 6315 entities being benamis of Roopalben Panchal and 1315 entities being benamis of Sugandh probably without taking adequate steps to ascertain the genuineness of these entities while acting as a facilitator in what appears to be an act of either gross negligence or active collusion ill behoves them as a SEBI registered market participant. It is matter of concern that NSDL, which is a self-regulatory organization and within whose regulatory domain Karvy-DP falls, could not detect in advance the apparently systemic deficiencies in Karvy-DP.
The findings of preliminary enquiry as detailed above bring out a prima facie case of violation of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Markets) Regulations, 2003. SEBI is initiating formal investigations into the matter.
SEBI is initiating investigations into the matter and in the meanwhile, in view of the grave emergency arising out of the conduct of parties with the added risk of recrudescence of such devious practice in future and, with a view to protect the interest of investors and securities market from further such acts SEBI has, under Sections 11B and 11(4)(b) of SEBI Act, 1992, issued the directions, by way of ad interim, ex-parte order with immediate effect as above.


December 15, 2005


For full copy of order against BARGHAV PANCHAL (HUF), click here.

For full copy of order against DEVANGI DIPAKBHAI PANCHAL, click here.

For full copy of order against EXCELL MULTITECH LTD., click here.

For full copy of order against JAYANTILAL JITMAL, click here.

For full copy of order against KARVY STOCK BROKING LTD., click here.

For full copy of order against RAJAN VASUDEVBHAI DAPKI, click here.

For full copy of order against RITABEN R.THAKKAR, click here.

For full copy of order against ROOPALBEN NARESHBHAI PANCHAL, click here.

For full copy of order against SEER FINLEASE PVT.LTD., click here.

For full copy of order against SUGANDH ESTATES & INVESTMENTS PVT.LTD., click here.

For full copy of order against SUJAL LEASING & FINANCE PVT.LTD., click here.

For full copy of order against TAURAS INFOSYS LTD., click here.

For full copy of order against VEENABEN Y.THAKKAR, click here.

For full copy of order against ZENET SOFTWARE LTD., click here.