Yash Birla barred from securities market for 2nd time in a month

In a recent order the capital markets regulator said that it has found violation of securities law in the scrip of Birla Pacific Medspa Ltd (BPML) during July 7-15, 2011 and consequently, Yash Birla along with nine other individuals have been barred from accessing or transacting in the securities market for a period of two years.

It is alleged that BPML had transferred Rs 7 crore each to entities named Sanjukta Vanijya Pvt Ltd and Darshan Tradelink Pvt Ltd on July 07, 2011 as pass-through entities from IPO proceeds,  which were then advanced to net buyers on listing day namely Jalan Cement Works Ltd (Rs 3 crore), Marutinandan Infosolutions Pvt Ltd (Rs 2.29 crore), Orbit Financial Consultants Pvt Ltd (Rs 2 core), Rupak Trading Pvt Ltd (Rs 2.29 crore).

Together, these four entities paid Rs 12.52 crore on July 7, 2011 to their broker GRD Securities towards their pay-in obligation against buy trades in the scrip of BPML on listing day.

The four net buyers after receiving funds from the proceeds of the IPO from BPML, acquired a net of 67,11,242 shares (value of around Rs 9.29 crore) -- 21.56 per cent of the total delivered  quantity of 3,11,08,577 shares on July 07, 2011 and 10.3 per cent of the issue size.

The investigation found that in violation of the principles of fair market where the price of a scrip is to be decided on the demand and supply, the buyer entities namely Jalan Cement, Rupak  Trading, Orbit, and Marutinandan were the artificial buyers of shares of BPML who were financed by the BPML.

"It is alleged that BPML routed the funds of IPO to the above said four entities who eventually traded in the scrip with the help of funds received from BPML for providing buying support  in violation of the principles of fair market principle and thereby the act of BPML and its directors alleged to be fraudulent which resulted on the fraud on the investors of BPML," the SEBI order said.

These trades acted as a fraud on the investors by creating a misleading appearance of trading in the securities market and by supporting the demand (buy) and therefore the price of the scrip,  it noted.

This is the second time in a month that SEBI has come up with an order prohibiting Yash Birla from accessing the securities market.

On September 29, the Securities and Exchange Board of India (SEBI) barred four individuals, including Birla, from the markets in relation to manipulation in issuance of global depository  receipts (GDR) by Birla Cotsyn (India) Ltd way back in 2010.

Birla Cotsyn (India) Ltd (BCIL) is currently undergoing liquidation proceedings under the Insolvency and Bankruptcy Code (IBC).

The other individuals barred from the securities market are P.V.R. Murthy, Y.P. Trivedi and Mohandas Adige.

Last year, UCO Bank declared Yashovardhan Birla, also the Director of Birla Surya Ltd, as a wilful defaulter after the company failed to repay loans of Rs 67.65 crore.