Queries Raised Over Scrip Pounding

The SBI stock has crashed by nearly Rs 100 over a short span of three months. Its price has slid from Rs 333 on July 17 to Rs 239 on October 3 at the Bombay Stock Exchange (BSE), just prior to the GDR pricing. In fact, in the run-up to the GDR pricing, the SBI stock crashed by nearly Rs 14 at the BSE. The pricing for a GDR is based on the average price for the last 3 days at the local stock exchange.

Marketmen, including stock markets chiefs and leading fund managers with FIIs, have raised fears over the manner in which the SBI stock price has been pulled down. Market circles have expressed uncertainty over the nature of foreign holding pattern in the SBI equity following the GDR offering.

 

The market witnessed a systematic pulling down of the SBI stock price by select FIIs and local players. A section of the foreign institutional investors merely restructured their portfolios by selling the SBI stock to pick up the GDR offering of the same stock, as seen earlier with Telco and ICICI stocks. The Videsh Sanchar Nigam Ltd stock, which is highly illiquid, also witnessed a slide even while reports of the clearance of the disinvestment plan filtered through.

According to BSE president M G Damani, an inquiry should be called in for the price hammering. Nothing has gone wrong over the past few days which would warrant this sharp change in the SBI stock price. The sharp slide proves the theory that leaving the market in the hands of a few is dangerous.''

Pressure against the SBI GDR also came from the SBI Bachao Andolan which argued that after the GDR offering, the foreign holding pattern in SBI may exceed even 30 per cent.

The SBI GDR prospectus says that uncertainty exists over how existing guidelines apply to registered FIIs holding GDRs or shares withdrawn from the depository facility. and also whether these shares (represented by GDRs) will be included as part of the FII's holding as part of the 10 per cent individual limit.