Just a day after the stock of KGN Industries shot to a dizzy height of Rs 55,000 from Rs 100, another penny stock, Sylph Technologies, today witnessed a similar price manipulation.
The share rose by 1,00,000 per cent from 80 paise to Rs 800 on the Bombay Stock Exchange (BSE) during the day. However, the stock closed at Rs 200. Both Sylph Technologies and KGN Industries did not attract any circuit filter as the same is not applicable on the first day when a stock re-lists for the purpose of 'fair price discovery'.
"Definitely some players have indulged in manipulation," said R K Jain, Director, Sylph Technologies. Jain was talking to Business Standard from Indore. "Ours is a very small company, engaged in job work for software designing, with a turnover of Rs 1 crore and profit of merely Rs 2 lakh annually. Nothing has changed in the fundamentals of the company in the past four years, and no new things are happening to make the stock so exciting," he said.
Jain has already conveyed the same message to BSE and the Securities and Exchange Board of India (Sebi) -- two institutions duty-bound to stop manipulators from making a mockery of the system.
When contacted, the BSE spokesperson refused to comment on the issue. Prime Database director Prithvi Haldia said, "The regulator should not show any sort of delay in investigations."
BSE had suspended Sylph Technologies (then called Majjarrsha Housing Finance Ltd) in 2003 for non-compliance issues. The stock, however, was not traded since 2001 due to lack of investor interest.
The promoters of Sylph Technologies hold a 23.88 per cent stake in the company, while some other investors, namely Raj Kumar Sehgal, Pushp Lata Soni, Ashok C Samani and Mona Dubey, together hold 6.17 per cent. The rest is the floating stock.
Market participants have also questioned the move of BSE to allow KGN Industries to trade today even after they had said that all the trades conducted in the stock on Wednesday were under investigation.
"The stock was suspended for the past seven years. So, it would not have made a major difference had BSE suspended the trading until the investigations were completed," said a broker.
Instead, the bourse set an average price of Rs 5,216.30 for a stock that was re-listed at only Rs 100. The stock on thursday managed to gain over 2 per cent during the morning trade before closing the day at Rs 5,119, down 1.86 per cent.
The promoters' nearly 50 per cent stake in KGN is locked in and they are not allowed to dilute the stake as per a BSE stipulation.
Another 49.52 per cent is held by Scenario Holdings, Convent Fin-invest, Victor Fincap and Standard Leasing Finance. The floating stock of the company is only 1.45 per cent, making it easy for operators to manage the stock price.
The two incidents have yet again triggered the debate over the application of circuit filter on the first day of listing.
Considering the price rigging in some of the IPOs, Sebi too had proposed to apply a circuit filter of at least 20 per cent on the first day.
"However, this could be the correct time for the regulator to implement the proposal and put a full stop on such incidents. Such a move would be yet another step towards making the markets mature and unscrupulous aliments more accountable. If the company has potential then let the stock hit 10 circuits," said another broker.
