SEBI in its latest move has asked the exchanges to restrict the trading in shares of 331 companies that are suspected to be shell entities. However, shares of some of the known companies have returned up to 188%.
The Securities and Exchange Board of India in its latest move has asked the exchanges to restrict the trading in shares of 331 companies that are suspected to be shell entities. However, shares of some of the known companies out of 331 have returned up to 188% but these returns are now of no use to man or beast. The overnight suspension has escalated the worries amid the market participants as any of these shares can’t be sold this week onwards.
Shares of Prakash Industries have nearly tripled since the beginning of this calendar year, surging 188% to Rs 139 from Rs 48.25 as on 2 January 2017. Other stocks include Parsvnath Developers, J Kumar Infraprojects, Marg, JMD ventures, Interglobe Finance which has gained up to 74% so far this year.
Parsvnath Developers, SQS India, J Kumar Infra and Prakash Industries which figure among 331 “suspected shell companies”, were referred to market regulator Sebi by the government and now face probe for alleged tax evasion and other frauds, even as they denied any wrongdoing on their part.
Parsvnath Developers said that it is not a shell company by any “stretch of imagination”. J Kumar Infraprojects said it is not a shell company and suspicion of the regulator is uncalled for. “Our company’s compliance track record both with the exchanges and Registrar of Companies have been impeccable.”
Prakash Industries said that directions issued by Sebi are “totally devoid of merit and uncalled for. Besides, there has never been a occasion when our company has indulged in any kind of malpractices in stock market.” Pincon Spirit said, “We are ready to provide all the necessary information and extend all cooperation to the regulator to resolve the issue so that the name of the company is excluded from the shell companies list at the earliest on merit basis.”
While trading has already been restricted to just once a month (on first Monday of the month) in shares of 162 companies from the list, others may soon face similar or even stricter curbs. In addition to the curbs imposed by the capital market regulator and the stock exchanges, these companies may face further action depending on the outcome of the probes by the income tax department and the Serious Fraud Investigation Office (SFIO), among other agencies.
On 7 August 2017, SEBI had directed bourses to initiate action against 331 suspected shell companies that are listed and these scrips will not be available for trading this month, on Monday, according to a communication. The regulator’s directive came after the corporate affairs ministry shared a list of 331 listed companies that are suspected to be shell entities and could even face “compulsory delisting”. Stepping up the surveillance measures, these entities would be subject to independent audit and if required, forensic audits could also be initiated to check their credentials.
Last month, Prime Minister Narendra Modi had said 37,000 shell companies indulging in tax evasion had been detected and more than three lakh firms were under the scanner for suspicious dealings, post demonetisation announced in November last year.