The stock price of Akruti City, which was ruling at Rs.880 on 27th Feb 09, at the beginning of March F&O Series, has moved to Rs.2,300 in just three weeks. A rise of over 150%.Is this a case of price rigging by the operator or have short sellers been trapped?
It is necessary to understand the past financial developments that have taken place in the stock in the last three months. Promoters of the company, in Oct 08, had availed loan of Rs. 140 crore from Barclays, by pledging about 70 lakh shares of Akruti, with a trigger of Rs. 610. Share price fell to Rs.606.30 on BSE and to Rs.605.25 on NSE, on 13-1-09, and hence Barclays recalled its loan by giving a notice of 7 days to the borrowers. The promoters at that time were already indebted to Indiabulls with 15.50 lakh shares being pledged with them. This news came to the knowledge of a group of bear cartel (comprising of 4 institutional investors) and suspecting that promoters would be unable to repay this huge amount, this cartel short sold about 11 lakh shares on 14th and 15th Jan in F&O Segment. Due to this , share hit its 52 week low at Rs.550 on 15-1-09. This cartel was able to short sell maximum of 11 lakh shares as Market Wide Limit of the stock on NSE in F&O segment is 13 lakh shares only.
This cartel rolled over its shorts from Jan to Feb series by incurring a loss of Rs.100 per share, as Jan series was ruling at Rs.880 while Feb series was ruling at Rs.780. Even shorts were rolled from Feb to March series at a loss of Rs.150 per share, as Feb was ruling at Rs.1,050 and March at Rs.900 per share. March F&O expiry is due on 26th March. April series is ruling at Rs.1,785 against Rs.2,250 of March, with a higher difference of Rs.465 per share. It is learnt that this cartel may not roll over its shorts to April series. If this is indeed true, the share price which is now ruling at Rs.2,300 can even rise to Rs.3,000 , by the time March series expires.
On 18-3-09, 1.97 lakh shares were marked for delivery on BSE (out of 42.88 lakh shares traded) and 3.12 lakh shares on NSE (out of 61.60 lakh traded). Insiders say that as the floating stock is about 5 lakh shares with the public (out of total public float of 67 lakh shares) all of this is practically cornered by the informed circles, thus increasing problems for the bear cartel. Of this 5 lakh, 1 lakh shares are of inside circle having traded amongst them for tax planning. Insiders also say that these 4 lakh shares , even if were acquired at an average of Rs.2,000 per share, would have cost Rs.80 crore, which is less than the profit made by the insiders, as a mark to market profit ,on open interest of F&O, which is estimated at Rs.200 crore.
If the bear cartel does not opt to roll over its position in April series, we may see climax of this drama on 26th March, with share price peaking on that day. If it is rolled over (which is unlikely) we may see this drama continuing and share can move to Rs.4,000 by April expiry.
This establishes that this is not a case of price rigging but short sellers getting trapped and are now trying to get out of the mess having created by them. In this cartel , two local Merchant Bankers and Brokerage Houses with 2 FIIs , through P Notes, are said to be involved, who played on inside information, which is unethical and prohibited. A huge price has been paid by them for this breach.
It is also said that these types of cartels are active in the market and are hammering the stock prices of Realty and Banking sectors by building up shorts in F&O segment. If they experience the same treatment from the promoters and informed circles of the stocks battered by them , we may see the Akruti saga getting repeated in those stocks.
Source: vtycoon
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