sebi:WTM/GA/21/ISD/10/05

SEBI · SEBI · 2005-03-01 · WTM (Whole Time Member) - name not explicitly stated in the provided text

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Facts / Headnote

Ad interim ex-parte directions issued restraining directors, top trading clients and connected entities from dealing in Eltrol securities; Eltrol restrained from issuing equity or altering capital structure and from dealing in securities market; exchanges and depositories directed to enforce.

Provisions invoked

• s. 11B
• s. 19

Regulations

• Reg. 8

Holding

SEBI found a prima facie case of violation of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Markets) Regulations, 2003 arising from an unprecedented 649% price rise and artificial trading interest in Eltrol Ltd shares, and issued ad interim ex-parte restraining directions against the company, its directors, top trading clients and connected entities pending formal investigation.

Full text

Home » Enforcement » Orders » Orders of Chairman/Members Enforcement Enforcement▼ Order in the matter of Eltrol Ltd Oct 05, 2005 | Orders : Orders of Chairman/Members SECURITIES AND EXCHANGE BOARD OF INDIA

1.1.Sudden spurt in price and trading volume of certain companies in a short period of time, often referred to as “mid cap” or “small cap” companies have been engaging the attention of SEBI and the stock exchanges for some time. Such trading has been under the surveillance of SEBI and the stock exchanges to determine whether the trading volumes and price rise have been the result of unfair trade practices or market manipulation. One such company whose shares have shown a significant increase in prices as well as trading volumes in a short period of time is Eltrol Ltd. (hereinafter referred to as ‘Eltrol’ or ‘the company’). 1.2.During the period from March 1, 2005 to September 23, 2005, the price of the share of Eltrol (face value Re.1/-), duly adjusted for corporate actions, on BSE, on which the share is listed since July 1995, opened at Rs.0.47 touched a high of Rs. 3.52 on September 1, 2005, a low of Rs. 0.43 on March 2, 2005 and closed at Rs.1.85 on September 29, 2005. Thus, during the 128 trading days from March 1, 2005 to September 1, 2005, the price of the share on BSE has shown a rise of 649%. 1.3.During the period March 1, 2005 to September 29, 2005, there was substantial variation in the daily traded quantity. On July 1, 2005 only 1 shares was traded while on August 26, 2005, 1,36,70,180 shares (i.e. about 1.37 crores shares) were traded. The average daily traded quantity during the relevant period works out to about 7,84,847 shares. In terms of trading value, as per

2.11. A brief summary of the quarterly financials of the company is given below: Table 5 – Financial Performance (figures in Rs. Million) Type Unaudited Audited Audited Year Ended 31 Mar 05 31 Mar 04 31 Mar 03 Net Sales 28.8 20.92 1.01 Other Income 1.91 1.15 2.42 Total Income 30.71 22.07 3.43 Expenditure -29.19 -21.81 -3.3 Operating Profit 1.52 0.25 0.13 Gross Profit 1.52 0.25 0.13 Profit before Tax 1.52 0.25 0.12 Tax -0.15 -0.07 -0.04 Profit after Tax 1.37 0.17 0.08 Net Profit 1.37 0.17 0.08 Equity Capital 42.51 42.51 42.51 Reserves 130 0.03 0.03 EPS 0.03 - - Nos. of shares – Non Promoters - 35960000 1860400 % of shares – Non Promoters 100 84.59 43.76 Note: ‘-‘ indicate that no data is available for that that period. Source: BSE 2.12. From the above, it is seen that during the year 2004-05 the company had a net sales of Rs.288 lakhs (Rs. 209.20 lakhs during 2003-04) and a net profit of Rs.13.70 lakhs lakhs during 2003-04 and Rs.8 lakhs during 2002-03). 2.13. In sharp contrast to the record of turnover and profitability of the company in the past 3 years the quarterly unaudited results for the quarter ended June 30, 2005 as furnish the company to BSE, showed a sudden significant turnaround in the performance of the company. The company which was making nominal profit till the financial year e March 2005, had a large accumulated loss and as such did not declare any dividend, showed a net sales of Rs. 781.40 lakhs during the quarter ended June 30, 2005 (Rs.1 lakhs during the qu

Source: SecMarx — sebi:WTM/GA/21/ISD/10/05. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.