Baba Ramdev recently advised people to invest in Ruchi Soya during a yoga session, which sparked outrage from the market regulator SEBI in its familiar style. Although it was like calling attention to a small point of a bigger problem.
It can be said about Baba Ramdev that he is only the brand ambassador of the company. He has no stake in Ruchi Soya or its parent company Patanjali Ayurved. Apart from this, he also did not make any sensitive statement regarding the price of the share, which could be considered that he violated the rules of insider trading.
Yes, it can be said that Ramdev is not a Certified Financial Advisor. In such a situation, they should not be advised to invest in shares. However this is only a small part of the whole picture. Most of the promoters or bankers are busy taking their word loudly to the clients and the press before a public issue. Even a novice can understand that through this they are trying to entice people to invest in their issue.
The bigger concern, however, is price manipulation, as was evident in Ruchi Soya too. But it seems that the regulator is completely ignoring the matter. After all, how can we say that? Well, this is understandable by the behavior of the regulator itself.
The way its shares behaved post the re-listing of Ruchi Soya, it should have been noted. For those who do not know, let us tell you that Patanjali had bought Ruchi Soya in November 2019 through the National Company Law Tribunal (NCLT) for Rs 4,500 crore, while she was not its highest bidder.
Since 99% of the equity (of the old company) of the company had gone out of trading, taking into account the acquisition value, the share price of the new company would have been Rs 145. This should have been the ideal price at the time of its re-listing. However, after the re-listing in January 2020, the share price of Ruchi Soya jumped from Rs 17 to Rs 1,500.
Most of the shares of Ruchi Soya are not available for trading. The promoters hold 98.90% stake in the company, of which 99.97% is pledged with banks. At a price of Rs 1,500, the company’s market capitalization reached Rs 45,000 crore. After that, what happened was expected. The shares took a U-turn. In September last year, there was a sudden fall in it and it came to a price of around Rs 400.
Multibagger stock: This chemical stock gave 120% return within 45 days as soon as it was listed, did you buy?
In the midst of this insane volatility, its stock once again reached the level of Rs 1,000. Its market capitalization at this price is 30,000 crores and it has remained above this for the last one year.
The company has now got the nod to bring a follow-on public offer to bring down the promoters’ stake to below 75% as per the rules. In such a situation, now its price also looks stable at the current level. It will be interesting to see what decides the final price of this book-built issue.
Cryptocurrency: Bitcoin registers biggest increase in minutes since July
The case of price manipulation is often seen in companies whose shares are available for trading in small quantities. Due to this many times retail investors fall in the trap and lose their hard earned money.
However, this case of price manipulation becomes more dangerous when it is in a stock which is yet to come for public issue shortly. Such companies make some of their stocks available for trading and set an inflated price in the benchmark and at the same time create a perception in the minds of the people.
Why Zee Entertainment’s board did not accept Invesco’s EGM demand
Ruchi Soya aims to reduce promoter shareholding and increase public shareholding to 25% within the next three years. Now such a company whose value was Rs 4,350 crore in December 2019 and was bought at the same price. That company is now going to make a public offer of the same amount or more for a very small stake in it.
Ruchi Soya’s business has never been bad, just mismanaged. Due to this the company got into financial troubles. The company reported revenue of Rs 16,132 crore in FY21, up from Rs 13,042 crore recorded in its year.
The company’s net profit also stood at Rs 680 crore in the last financial year, which raises a curiosity. This is because this company had never recorded such a profit in its history.
Reliance extends the date of completion of the deal with Future Group for another 6 months, the matter is trapped here
Apart from this, it is also worth considering what the lenders got from the sale of this company. Patanjali managed to own it despite not being the highest bidder and the lenders suffered a haircut of 52 per cent in the deal. Well, Ramdev is not a financial advisor, but he has managed everything quite well so far. It would be good for SEBI to ask some good questions now.
-N Mahalaxmi
Facebook us for social media updates (https://www.facebook.com/moneycontrolhindi/) and Twitter (.) to follow.
.