SEBI probe sought in VLS scam

Investors have demanded an investigation by the Securities and Exchange Board of India (SEBI) into alleged heavy price manipulation (insider trading) by non-banking finance company (NBFC) VLS Finance in its share allocation at the time of its public issue in 1994. “Insider trading took place in the VLS scrip as the price of the company’s scrip rose from Rs 50 to Rs 800 in one year’s time prior to public issue,” VLS Finance Investors Forum convenor Suresh Chand said in a statement. It said the trading volumes of the VLS scrip was very small – less than 3000 shares except in the second half of 1994 when it increased to about 5,000 shares. VLS Finance – which is now under the scrutiny of the Income-tax Department for evading taxes – had come out with a public issue in mid-1994 at a premium of Rs 390 per share over Rs 10 nominal value (Rs 400 per share), the highest premium charged by a company through a public issue. Following the public issue, there was a continuous fall in the price ofthe company’s shares and currently the scrip is traded at Rs 12.75 in stock markets. “Investors who were allotted shares suffered a loss of Rs 390 per share,” said an investor. Demanding an inquiry into the activities of the company by various regulators including the SEBI and the Reserve Bank of India (RBI), the forum said that investment made by small investors “should be returned as the company had indulged in cheating and all sort of financial bungling and frauds.” “There was no reason for the company to charge Rs 400 per share in 1994. That too after manipulating its share price prior to the issue. There is no wonder the scrip is quoting at around the face value,” investors said, adding that such companies were responsible for the current pathetic state of the capital market. The I-T Department had recently detected that film-makers had allegedly entered into bogus transactions with VLS Finance to help it generate fake depreciation claims to the tune of several0000000 of rupees resulting inmassive tax erosion. I-T officials had carried oout search operations at VLS offices and proof regarding the evasion was gathered. SEBI probe indicts ABS MD MUMBAI The demand for probe into VLS Finance share manipulation follows the recent Securities and Exchange Board of India probe which indicted ABS Industries managing director Rakesh Agarwal for insider trading. This is the second case after Hindustan Lever in which the market regulator has completed investigations and got round to initiating preliminary action. Agarwal has been accused of purchasing his own company’s shares from the market prior to its takeover by a Bayer AG subsidiary, Bayer Industries, in October 1996. The shares were bought by Agarwal’s brother-in-law from and then offered to Bayer Industries following an open offer intended to hike Bayer’s stake in ABS to 51%. SEBI had completed its investigations in the case and communicated its findings to Agarwal earlier this week. He has been asked to respond to thefindings within 15 days of receiving the communication, failing which the regulator would go ahead and take action under the SEBI Act and the SEBI (Insider Trading) Regulations.