Sebi bars 7 cos from issuing shares or convertibles

Sebi investigation over 2009-2010 found seven companies where price manipulations were prevalent. The seven are: Asahi Infra , IKF Technologies , Avon Corp , K Sera Sera , CAT Tech , Maars Software and Cals Refineries .

The modus operandi has been that the companies issue shares in the form of Global Depository Receipts (GDRs) and those are later converted into domestic shares. The GDRs are then cancelled, and the Indian entities go and sell them in the market. The scam stems from the fact that there was no transparency as to how many shares get converted from GDRs to shares, or shares to GDRs, which was used as means to depress prices or manipulate prices by the named companies.

These illiquid and low price companies continue to exist and trade at the market. There was sudden activity noticed on their counters which ticked off the market regulator

Sebi sees a prima-facie violation of FEMA regulations in the conversion of GDRs to shares and vice-versa. It has thus passed an order barring these entities from capital markets, including an FII, four FII sub-accounts and five domestic participants or intermediaries who have undertaken such transaction. That apart, the seven companies have been asked not to issue any shares or convertible instruments so as to alter the capital structure of the company.

However, since the FEMA regulations fall outside the purview of Sebi, the market regulator has directed the Enforcement Directorate to take up the issue further.

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