Rakesh Jhunjhunwala has been reducing his stake in Prakash Industries, a "shell company" as per SEBI.
The 331 shell companies against which SEBI has initiated action include well-known companies such as Prakash Industries, Parsvnath Developers, J Kumar Infraprojects, Gallant India and others. It is intriguing to find the names of renowned investors in these companies such as Rakesh Jhunjhunwala, who owns more than 1% in Prakash Industries.
The share price of the company has skyrocketed so far this year, and the stock has more than tripled year to date. The share closed at Rs 139.15 on Monday. However, Rakesh Jhunjhunwala has been reducing his stake in the company. As per the data filed with SEBI, the ace investor held 2.21% equity stake in the company as at the end of December-2016. As at June end, he has reduced his stake by more than 50%. Rakesh Jhunjhunwala holds 1.01% as on 30 June 2017, as per data filed with SEBI. Other notable public shareholders in the company as in June 2017 include BNP Paribas Arbitrage, which holds more than 3.3% in Prakash Industries.
In fact, renowned mutual fund houses in India such as HDFC Mutual Fund, Reliance Mutual Fund, UTI Mutual Fund, DSP Blackrock and Birla Sun Life Mutual Fund have invested more than 1.3% each in J Kumar Infraprojects. Notably, HDFC Mutual Fund holds 3.72%, while UTI holds 2.65% as at the end of June 2017. Together, the Indian mutual funds have invested more than 11% in the company. In a media release, J Kumar Infraprojects said, “ We are seeking legal advice in the matter and we are approaching the regulator ie SEBI, requesting it to recall its direction”. The shares of the company are up by nearly 40% in the year. Expressing their concern over the development, in the same media release, the company said, “The suspicion of the regulator is uncalled for, our compliance track record has been impeccable.”
These companies are not alone in expressing their point of view. Realty builder Parsvnath Developers said it is not a shell company “by any stretch of imagination”. The company, in a media statement, said that serious prejudice has been caused to the company due to the regulator SEBI’s actions. In a media release the company said, “The directions issued by SEBI in terms of the letter under reference are completely uncalled for and is without any basis. We have never ever indulged in malpractices in the stock market.” Notably, Fidelity Securities Fund owns more than 4% in the company. The share is up by 84% in year to date terms, and closed at Rs 23.85 on Monday.