Feb 05, 2013 03:34 PM IST | Source: CNBC-TV18

Margin call trigger may have led to 40% fall: CEBBCO

After falling 40 percent in the last two sessions, CEBBCO recovered today on clarification from the management that the fundamentals of the company are strong. Speaking to CNBC-TV18, Ajay Gupta, executive director said the stock fall was beyond his understanding.

After falling 40 percent in the last two sessions, CEBBCO recovered today on clarification from the management that the fundamentals of the company are strong. Speaking to CNBC-TV18, Ajay Gupta, executive director said the stock fall was beyond his understanding. The company, he says, is not facing any corporate governance issues and promoters have not sold any share in the open market.

He says the identity of the seller will be known next week, but in the meantime, the company has not heard of selling by any large institutional investors. "We want to assure investors that fundamentals are strong," he clarifies.

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Gupta believes this is an issue related to margin call trigger as the company's results declared were in-line with market expectations. Gupta says CEBBO conducted conference calls to allay investor fears. "We have spoke to Religare to seek further clarity," he told CNBC-TV18.

According to bulk deal data available with the exchanges, India Max Investment Fund sold 5.286 lakh shares on the NSE at an average price of Rs 48.56 and another 4.19 lakh shares on the BSE at an average price of Rs 48.2. The fund was holding 25.09 lakh shares at the end of December.

Besides India Max Fund, Aditya Birla Finance also sold 3.25 lakh shares at Rs 48.2 a share.

Prasant Desai, who bought 10 lakh shares in October 2012 at about Rs 101 a share, also sold around 7.33 lakh shares at an average price of Rs 48.

Below is an edited transcript of Ajay Gupta's interview on CNBC-TV18

Q: Why has your stock plunged in the last couple of sessions?

A: That is the only thing I am not able to answer, because there is nothing wrong in the company, there is no corporate governance issue, Deloitte continues to be our auditors, we just declared results which are in line with market expectations and because of all this we are just failing to understand. The sense we are getting from the market is that there has been some margin pressures which triggered the fall on late Friday afternoon.

Some people are linking it to the Religare mismatch which happened on Friday and then over the weekend retail investors panicked and from Monday it has been selling. Yesterday, we explained to the entire investor community that there is no problem in the company, our results are in line with what we have been guiding and are much better than last year.

Last year, the whole year profits were at Rs 40 crore and the stock was at about Rs 60-65. This year, in the first three quarters we declared a profit after tax (PAT) of Rs 48 crore and the stock is now at Rs 45-47 which is not logical. It is a blip and an aberration. I am sure it will correct. There is nothing wrong in the company. I just want to assure all the investors that everything is perfect.


Q: Have you touched base with Religare to figure out whether they had a problem at their end?

A: We have spoken to Religare and they said that it was not them, but you never know these things. We just had a verbal chat, so we don't think it is them and there have been rumors in the last two days. Please don't go by these rumors, go by fundamentals. If you have any confusion call up, the entire senior management is available to talk to you, you can call up the company secretary, the CFO, you can call me. We don't want our investors to be losing any money because of us. There is no issue, the company is trying to do its best.

Q: You alluded to the possibility of some margin call related selling. Have you been able to ascertain which kind of investors might have faced these margin pressures?

A: The problem is we get a report every Monday, so we will get to know only next Monday of the list of investors who have sold out on Friday and yesterday because for Friday also the delivery happens only on Tuesday. We will get to know that in the next week and then we will speak to those individual investors to understand as to why they want to sell, what is wrong. If there are any doubts, we would clarify. So, we are taking a pretty proactive role in the best manner possible.

Q: You can confirm that this has nothing to do with any of the stock which is pledged by the promoters and they have not sold anything or none of their stock has come into the market over the last 48 hours?

A: I can certify and assure that the promoters have not sold a single share in the open market nor do we have any intentions, we are long term people and do not sell stock in the market. Secondly, the total pledge is only about 18 lakh shares, the promoters have more than 3 lakh crore shares and the total loan outstanding with Religare is only about Rs 2 crore.

It is not an amount which the promoters would not ensure to avoid a debacle like this. Even if any of the pledged shares would have been sold within two hours, it gets informed to the BSE and NSE and even right now ,there is no intimation, nobody has sold this is our guarantee. We are very serious promoters and we won't let anything like this happen. These are rumors.

Q: Yesterday, there was a bit of delivery based selling, you said you had reached out to your institutional investors over the last 24 hours. Did you hear from any of them that they had sold out in a big way, can you confirm the identity of any large investor or holder of your stock who might have sold?

A: We haven't heard from any of our large investors who want to sell. We had the con-call yesterday and the only good point for me is the fact that when the stock hits 40 percent down in two days, then all investors shy away from the stock. In our case there was trading of almost 45 lakh shares yesterday, which is close to 10 percent of the stock.

We have enough investors who are serious, who like the company and believe in the company and its growth prospects. Some people have gone out and realised that there is nothing wrong in the company and have picked up the stock yesterday. Even in the morning today, the traded volumes were pretty large. So though there are some investors panicking, there are enough investors who are also willing to pick up the stock.

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