The move will prevent the Gitanjali group companies from accessing the market.
Market regulator Securities and Exchanges Board of India (SEBI) may declare Gitanjali Gems’ financial services arms as 'not fit' to conduct business, a source told Moneycontrol.
These companies are - N&J Investment Pvt Ltd, Eureka Finstock Pvt. Ltd, Decent Investment & Finance Pvt Ltd and Decent Securities & Finance Pvt Ltd.
“SEBI is investigating the firms and in next few days, action will be taken,” the source said.
An executive in a listed diamond company, which was financial distressed and was approached by one of the four Choksi companies, told Moneycontrol: “These companies were used by the Choksi to rig share prices through benami transactions."
According to its annual report, Gitanjali Group has frequently given loans to these companies. In FY17, Gitanjali gave a loan of Rs 19.71 crore to N&J Finstock Pvt Ltd, Rs 10.2 crore to Eureka Finstock Pvt Ltd, Rs 8.49 crore to Decent Securities & Finance Pvt Ltd, and Rs 2.71 crore to Decent Investment & Finance Pvt Ltd.
Interestingly, there is no information on how these funds were used.
In March last year, a whole-time member of SEBI had passed an order calling for an investigation into the alleged manipulation of Gitanjali Gems’ shares, and also for violation of takeover regulations.
However, SEBI has not passed the final order in the case as yet. Worse still, the regulator approved the initial public offering application of Nakshatra, a group company of Gitanjali Gems in June 2017 even while the investigation was on. Nakshatra is yet to go public, though.
On receipt of a market alert, SEBI had conducted a prima facie examination of trading in the scrip of Gitanjali Gems for the period between July 18, 2011 and January 25, 2012.
The trading pattern in the scrip of Gitanjali Gems prima facie indicated that the promoters used the Choksi Group to build up a substantially large position in the derivatives segment, thereby circumventing the position limit prescribed by SEBI.The disclosures made by Gitanjali Gems to BSE regarding shares pledged by the promoter and promoter group for the quarter ended September 2011 and December, 2011, was found to be different from that obtained by SEBI from the depositories.