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Ketan Parekh entities rigged Aftek Infosys share: Sebi

BS Markets Bureau in Mumbai

In its pre-final report on the developments leading to the market crash of March 2001, the Securities and Exchange Board of India has unequivocally said that entities related to Ketan Parekh, especially Classic Credit and Panther Investrade, "created an artificial market" and engaged in price rigging in the Aftek Infosys share.

During the course of its investigation, the capital markets regulator has found that the acquisition of Aftek Infosys shares by the Ketan Parekh group, when taken with the shares held in Vidyut, another firm alleged to be associated with Ketan Parekh, exceeded the threshold limit of 15 per cent stipulated by the Sebi Takeover Regulations, 1997, on March 2, 2001.

Responding to the Sebi findings, Nitin Shukla, director (finance), Aftek Infosys, said, "We have already paid the fine for violation of the takeover code and have appealed to the Securities Appellate Tribunal, and the appeal is still pending."

The Sebi report notes that the promoters of Aftek Infosys facilitated the cornering of shares in the hands of entities connected with Ketan Parekh through preferential allotment and structured financing cum option agreements.

Further, these companies used the 'no delivery period' combined with compulsory demat and announcement of a second preferential issue to engage in price manipulation, it said.

A large quantity of shares was sold by Ketan Parekh entities in 'no delivery period' and the obligation to deliver shares in the subsequent pay-in was met by receiving the shares from the promoters by exercise of option clause of a structured financing arrangement.

"Further, the shares acquired by the promoters from IDBI were also passed on to Ketan Parekh entities at price much less than the market price. The difference is estimated at Rs 67 crore (Rs 670 million) through these structured financing, according to the Sebi report. This clearly bring out promoter and broker nexus," the report added.

The cornering of shares in the hands of Ketan Parekh entities facilitated price manipulation by these entities, who indulged in large buy and sell orders, circular trades, artificially increasing the price by putting successive buy orders at higher than the last traded price, especially in particular time slots and abuse of circuit filter mechanism.

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