Promoters of a cable company seem to have landed in a soup after hiring the services of someone with a "history of engaging in manipulative practices".
Promoters of V-Marc India allegedly hired Prijesh Kurani, chief investment officer of the Dubai-based Richr Business Services, to manipulate the price of their company's stock. But, the details of their scheme were revealed to the market regulator when the regulator was investigating Kurani for another front-running case.
V Marc's shares closed around 10 percent lower today.
The Securities and Exchange Board of India (Sebi) had conducted a search and seize operation on Kurani's residence in May 2022, when investigating front-running of trades at Axis Mutual Fund. The data on Kurani's mobile, particularly WhatsApp messages, came to serve as important evidence in V-Marc's case.
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V Mac's promoters, along with others, have been asked to hand over "wrongful gains" of Rs 6.38 crore, in Sebi's interim order dated February 29, 2021. Twelve of the 15 noticees in the order have been banned from accessing the securities market.
"Trust is the foundation of the securities market ecosystem. When public investors deal in securities, they trust that the scrip is free from fraud and manipulation. When promoters such as Mr. Vikas Garg themselves indulge in cynical and egregious manipulation as has been observed in this case, not only are they duping the specific public investors who were lured to invest in their company, they are also striking at the core trust of investors in the securities market ecosystem," the interim order stated.
"The actions of Mr. Vikas Garg and his ilk particularly threaten trust and hence capital formation via the crucial SME segment, and deserve to be dealt with firmly in accordance with the law," the order added.
The scheme allegedly involved manipulating the market right from the time the scrip was listed. During the examination period, which was from April 9,2021, to April 30, 2021, the regulator found that 85.86 percent of the stock purchases were made by Kurani and people associated with him and Garg, and 71.43 percent of the positive last-traded price (LTP) was contributed by them. LTP is a measure that the regulator tracks to see entities are colluding to move the market price irrationally.
Agreement signed
From the seized phone, Kurani's WhatsApp messages revealed even an agreement signed by him, V-Marc's Chairman and Managing Director Vikas Garg and the company's whole-time director Sandeep Kumar Srivastava. The agreement, based on a meeting that was held in Dubai, stated that "market making" of V-Marc will be handled by Kurani's company Richr, that Richr would purchase would be backed by 100 percent funding from V-Marc and its investors, and that the profit will be split between Richr and V Marc.
The agreement had "milestones" built into it--of facilitating the sale of these shares at different levels of market cap from Rs 500 crore and Rs 1000 crore to Rs 2,000 crore and Rs 5,000 crore, according to the interim order.
The regulator noted that a significant number of shares have been sold at elevated prices over the second half of 2023, and saw it as an indication that the conspiracy detailed in agreement was being implemented at an expedited pace. Therefore Sebi passed an interim order, in which the promoters and associates have been barred from the securities market until further orders.
The regulator has also impounded the "wrongful gains" of Rs 6,38,62,303 jointly and severally from the entities.
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