ED probes HFCL pvt placement with First Global cos

Rashmi Das

New Delhi, Jan 3: The Enforcement Directorate has initiated an investigation into Himachal Futuristic Communication’s private placement with group companies of Shankar Sharma’s First Global Stockbroking.

This private placement is being looked into along with the probe into the sale of HFCL shares by First Global to different FIIs and other sub-accounts on March 3, 00.

In a report to the joint parliamentary committee probing the last March’s securities scam, ED has stated that the source of funds for First Global to acquire HFCL shares appeared to be Global Trust Bank. ED has, however, said the price per share at which the private placement was made with eight group companies of First Global was determined in accordance with the Sebi norms.

“As per the available records, HFCL appears to have sold these shares to group companies of First Global at the rate of Rs 1,050 a share who have further sold it to First Global at Rs 1,060 per share. First Global, in turn has sold these shares to FIIs at Rs 1,060-1,075. The sale of these shares by FIIs is also being enquired into,” said the report.

Eight Shankar Sharma group of companies, including Vruddhi Confin Investments, Virta Trade & Agencies, First Global, and Panchal Components & Appliances, were allotted 11,40,275 shares at Rs 1,050 per share.

HFCL, on its part, has told ED that private placement with FIIs was made in full compliance with guidelines of both RBI and Sebi.
HFCL chairman Mahendra Nahata told this newspaper that “all legal procedures have been complied with by the company in placing these shares with First Global”.

HFCL has also stated that to augment its financial position, its board on December 8, 1999 had decided to raise capital by issuing 150 lakh shares of Rs 10 each by way of private placement at a premium, subject to Sebi guidelines and based on the market price of the company’s shares at the time of the placement.

In respect of the issue to be made to FIIs, the company had obtained an in principle approval from the central bank on February 3, 00 to issue 75 lakh shares of Rs 10 each at a premium of not less than Rs 401 a share to FIIs on preferential basis. However, HFCL decided to allot only 27 lakh shares to FIIs, permission for which was given by RBI on March 16, 01. The remaining 43 lakh shares were allotted to domestic investors.

The major FIIs which were sold shares in private placement, included ABN Amro, Alliance Capital, American Express, Bank of America, DSP Meryll Lynch, HSBC, Morgan Stanley, and Meryll Lynch Asset Management.