Now, ‘shell’ firms move to Securities Appellate Tribunal

Listed entities like J Kumar Infraprojects and Parsvnath Developers question Sebi action

Published: 10th August 2017 07:36 AM  |   Last Updated: 10th August 2017 07:36 AM   |  A+A-

By Express News Service

MUMBAI: A day after the Sebi rapping, companies knocked on the doors of the Securities Appellate Tribunal (SAT) seeking a stay on trading restrictions.

Listed entities like J Kumar Infraprojects and Parsvnath Developers on Wednesday moved SAT against Sebi action asking bourses to suspend regular trading and for classifying them as ‘shell companies’. Markets continued their downward slide on Wednesday, but the fall is attributed largely to geopolitical concerns.

The 331 firms have a market capitalisation ranging from `10 crore to over `2,000 crore with some even having high-profile investors including domestic and foreign funds like Blackrock and Fidelity.

Sebi’s action is believed to have stemmed from the MCA list of shell companies and the income tax department’s tax evaders list. However, analysts believe Sebi may have its own reasons for including firms with decent track record.

The 331 shares are moved to stage six of Sebi’s Graded Surveillance Mechanism (GSM), which is a pre-emptive surveillance measure that identifies securities with abnormal rise in price rise not commensurate with financial growth or changes in earnings, book value, fixed assets, net worth, etc.

These entities will now be subject to an independent audit and, if required, forensic audits to check their credentials. On Tuesday, many of the firms tagged annual reports and other financials along with their filings to press upon the exchanges that they are not shell companies.

“We are shocked to find our company’s name among the list of suspected shell companies as a result of which, our equity shares…are being shifted to GSM VI on the stock exchanges,” said J Kumar Infraprojects said in a disclosure.

“Our company’s compliance track record both with the exchanges and Registrar of Companies has been impeccable… As a result, our company’s securities may be traded only once in a month on a trade-to-trade basis and Sebi has envisaged a ‘financial audit’ thereby implicitly castigating us and tarnishing our reputation,” said Parsvnath Developers. It also said it was not a shell firm by any ‘stretch of imagination’.

SAT Sebi


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