SME stock price manipulation: Multibagger stock hits lower circuit after SEBI’s interim order; more pain left in the stock?
Mr. Vikas Garg, and entities involved in the IPO.
When we think of Small and Medium Enterprises (SMEs), the term "explosive growth" often springs to mind, and rightly so. In recent years, the SME landscape has witnessed a flurry of Initial Public Offerings (IPOs), many of which have delivered remarkable returns. However, amid this surge in IPO activity lies a lurking risk, one that regulators like the Securities and Exchange Board of India (SEBI) have addressed.
A recent development underscores SEBI's commitment to safeguarding investor interests. In a notable case involving V-Marc, SEBI uncovered fraudulent and manipulative trading practices, implicating the company's promoter, management, and associated parties. This scheme, orchestrated prior to the stock's listing, involved tactics such as cornering shares, manipulating volume and price, and selling inflated shares to unwitting investors.
To understand the events leading up to this revelation, let's rewind to 2021. V-Marc India's IPO, launched in March, garnered significant attention. The stock debuted on the NSE SME segment in April, experiencing a surge in value over subsequent months, only to suffer a sharp decline in November, triggering concerns among investors.
The shares were listed on NSE SME on April 9, 2021. The stock opened at Rs 46.50 per share, compared to the final issue price of Rs 39. By November of last year, it had crossed the important psychological mark of Rs 200 and delivered multibagger returns. However, the stock price crashed on Thursday, hitting a lower circuit of nearly 10 per cent, with a pending sell quantity of 4,000 shares
The catalyst for this downturn stemmed from a complaint received by SEBI in September 2022, alleging market manipulation within V-Marc. Following this complaint, SEBI conducted a thorough examination to ascertain potential violations of securities laws.
Key findings revealed a web of connections between V-Marc's promoter, Mr. Vikas Garg, and entities involved in the IPO. Entities associated with Mr. Garg accounted for a substantial portion of shares allotted during the IPO, raising suspicions of collusion. Further analysis unearthed damning WhatsApp exchanges, exposing a coordinated effort between V-Marc's management and certain individuals to manipulate the market for personal gain.
These exchanges outlined a profit-sharing arrangement, with V-Marc funding market-making activities to artificially inflate the stock price. Such activities, meticulously planned and executed, resulted in significant wrongful gains amounting to Rs 63,862,303.
In this intricate web of market manipulation, several individuals connected to V-Marc's promoter, Mr. Vikas Garg, played pivotal roles. Among them were Mr. Sudhir Gupta, Mr. Pratik Madhukar Sheth, Ms. Jinal Pratik Sheth, and Ms. Dharini Kurani. Their involvement, as detailed in SEBI's investigation, underscored the collaborative effort to artificially inflate V-Marc's stock price for personal gain.
In response, SEBI issued stringent directives, including restraining implicated entities from securities market dealings, impounding illegal profits, and enforcing asset disposals. These measures underscore SEBI's unwavering commitment to maintaining market integrity and protecting investor interests
Through its swift and decisive actions, SEBI aims to deter future misconduct and uphold the principles of fairness and transparency in the securities market.
By imposing stringent measures and holding wrongdoers accountable, SEBI reaffirmed its role as a vigilant guardian of investor interests. Through such actions, the regulatory authority aims to instill confidence in the market and deter future malpractices. Ultimately, SEBI's actions serve to safeguard investor trust and uphold the integrity of India's securities market.
Disclaimer: The article is for informational purposes only and not investment advice.