SEBI and BSE continue to ignore market manipulation but the Cals Refineries case is too glaring.
Even as the Securities and Exchange Board of India (SEBI) ensures that there is no competition to the two existing stock exchanges, the market is rife with manipulation. Take the example of Cals Refineries, a penny stock (Rs0.33 as on 23rd July on the BSE) which is leading the volume charts day after day but has no business worth talking about. Nothing is known about the company; yet, trading volumes are humungous. More than four crore shares of Cals are traded daily even when its market-cap is little more than Rs260 crore.
Cals put out a notice on the BSE on 17th May which says that it had raised about Rs800 crore in December 2007 through GDRs and has used this money for setting up a 5mtpa refinery at Haldia, which it expects will start production in the last quarter of FY11-12. Can this be true? Cals has not filed quarterly numbers since June 2008 (revenues of Rs2.7 lakh and loss of Rs2.2 lakh). The shareholding pattern (March 2010) is strange. The promoter group holds less than 1%. FIIs hold 6% (through Mauritius P-notes held by Goldman Sachs, Merrill Lynch and Taib Securities) according to information filed with the BSE.
Internet message-boards are hyperactive and range from outright attempts to lure more investors into this share to half-hearted attempts to console those who are trapped at higher prices. Most hopes are centred on the promoter company coming out with some fantastic announcement that is going to save all the trapped investors and make the speculators rich.
There has been some regulatory action around this stock, although never directly against the company. The latest one: on 1st July, SEBI passed a directive confirming the order against Chimming Trading Company Limited in the matter of alleged manipulative trading in Cals. In June 2009, SEBI had barred 26 entities from dealing in the capital markets for acting as conduits for Ketan Parekh and executing synchronised deals in five scrips over a period of 26 months —from January 2007 to February 2009. One of the scrips was Cals Refineries. SEBI and BSE see no evil in the clear manipulation going on in this penny stock.
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