- Wealth PMS (50L+)
SEBI has found Zylog management potentially guilty of massive fraud, says SEBI, in an interim ex-parte order (party not present) that disallows them from trading in the stock market. Of interest was the stock’s huge fall from the 300 levels to 68 in October-November 2012, an 80% fall.
SEBI member R.K. Agarwal has found what looks like serious attempts to mislead investors, including:
SEBI hasn’t finished its investigation yet, but the interim order bans the promoters Sthithi, Sudarshan Venkataraman, Ramanujam Sesharathnam, Parthasarathy Srikanth, Supriya Srikanth and S.P. Srihari from buying, selling or dealing with shares till further notice.
My thoughts: It’s commendable that SEBI has gone into such detail. But if true, this is securities fraud and the promoters must go to prison. The fact, if proven, that a promoter entity trades so much in the company’s stock, sometimes getting money from the company to do so, without the required disclosures, is all evidence of activity intended to fraud other shareholders. Such an offence should be penalised with a jail term, and SEBI does not have the power to send anyone to jail.
This probe should include an entity like the CBI Banking Securities and Fraud Cell, and the Serious Frauds Investigation Office.
SEBI should also fine the promoters appropriately. I don’t think there’s any money left, thought.
Zylog as a company looks great on paper for this price (Rs. 26.25 now, hitting lower circuit every day). The market cap of this company is just Rs. 87 crores, for what seems to be a Rs. 2,500 cr turnover and Rs. 115 cr. net profit. (See March results)
Value Research had first placed a “Buy” call on this stock in 2011 (price: Rs. 236), valuing it on the financial numbers revealed. In 2012, they said it was “sustaining momentum” (Price: Rs. 290). But in 2013, after the stock fell to Rs. 60 (!) they advise that
At this point of time one should avoid making fresh investments into it. Existing shareholders should wait for the March 2013-end balancesheet before arriving at a decision. It will make the picture clearer whether the company will be able to ease out the working capital requirements and meet out the debts.
I can’t blame VR for believing company provided info – it is all you have, really. But this is one of those times I have to say this: Keep a stop loss and respect it. You never know what really happens, but the price, it talks.
The above information makes it very difficult to believe anything revealed by the company.