Sebi Begins Probe Into Videocon Price Surge

The Securities and Exchange Board of India (Sebi) has commenced an investigation into the price surge of Videocon International stock. According to Sebi sources, the capital market watchdog has sought details from the bourses on transactions carried out between April 10 and May 25.

"The price of the stock surged from Rs 70 to Rs 140 during this period. We have sought details about the buyers and brokers from bourses. We intend to ensure that there was no element of price manipulation," a Sebi official told Business Standard.

This is the first time Sebi has commented on the price surge in Videocon International. "We are keeping a close watch on the price movements. It is only after we get the related data on specific transactions carried out and persons involved that we can take a specific view," the Sebi official added.

The stock was traded at Rs 50.55 on April 1 with 20.96 lakh shares changing hands on the Bombay Stock Exchange (BSE) alone. The share closed on the National Stock Exchange (NSE) at Rs 49.90 on the same day with volumes to the tune of 5.49 lakh shares. The company witnessed trading in a whopping 33.58 lakh shares on April 7, just two days before the announcement on the BSE. It closed at Rs 67 on the bourse.

Says a head of research at a leading institutional brokerage: "We have seen a long position in Videocon of 55 lakh shares and a short position of 10 lakh. This implies that somebody is extremely bullish on the stock. I do not believe that fundamentals justify any such stock pile up. Besides, the consumer goods market is not doing well to take a long position."

Analysts say that the announcement of the offer by promoters to acquire two per cent stake has triggered the rally.

"The Sebi takeover code provides this loophole to make public announcement of the proposed acquisition of two per cent stake in the company. There is very little Sebi can do as it cannot accuse promoters of clandestinely rigging the share price. Everything has been done in an open manner," an investment banking official at a leading merchant banker said.

Analysts do not rule out a possibility whereby the announcement of acquisition of two per cent stake in the company is being used by operators to push up share price. "The huge built up of position in the stock is astounding as the offer is merely for 14 lakh shares," the head of research added.

The mode of acceptance also needs to be clarified. "It remains to be seen if the pro rata offer as laid down in the takeover code is used for the offer. If the offer is carried out on a pro rata basis, small investors will get stuck with odd lots. However, if it is a lottery (that is an all or none policy), it is worth a try as it is the only worthy exit route," a dealer at an institutional brokerage said.