Sebi’s letter to Pyramid Saimira a forgery, several unanswered questions

“We are clear ….SEBI’s letter Forged….” That’s the blurb on Pyramid Saimira’s website, a sign of a relieved company or actually a relieved promoter that he is not under Sebi’s glare. But it would be unfortunate if the hoax perpetrated on the financial media, Pyramid’s shareholders and the market regulator Sebi were to end so tamely.

Sebi’s clarification shows its consternation: it says that the letter has been issued with ulterior motives and it will investigate the matter including the origin of the letter and also dealings in the scrip. Here’s what happened in a nutshell: PS Saminathan, chairman and co-promoter of Pyramid Saimira is in the middle of buying the stake of another co-promoter Nirmal Kotecha. This is an inter-se transfer, which is exempt from the takeover regulations, subject to certain conditions being met. The stake was supposedly to be bought at Rs 200 (but a submission to NSE in early December reveals otherwise, more about that later).

A fake letter from Sebi to the promoter, asking him to make an open offer to shareholders at Rs 250, did the rounds of the media. The letter was dated Dec 19 and was sent to the media on Dec 20, and was flashed on TV channels and in newspapers. Now, the company got the letter only on Dec 22, announced it to the stock exchange on Dec 23. Sebi asked for a copy of the letter on Dec 23 and then declared it a fake. Perhaps, Sebi could have been more proactive, got a copy from the media beforehand and issued a denial much earlier.

In the meantime, Pyramid’s stock price had see-sawed on the stock exchanges. The share price, which had risen from Rs 45 on Dec 11 rose to Rs 77 on Dec 19 and now trades at Rs 55. Evidently, some people have made a lot of money and yet others have lost money, after the denial came out. Some questions and some surprises: What was the motive? Someone seemed unhappy that Nirmal Kotecha was to get Rs 200 a share, while the market price was less than a fourth of that.

So, other shareholders too should have been compensated accordingly. So could this have been a bunch of disgruntled shareholders? Would they have gone so far as to forge the market regulator’s letterhead and circulate a letter that created so much havoc? Could this be some market operators who had cornered the stock and were looking to make a fast buck? But all trades done in the past few days are going to be scrutinised with a microscope and tough questions are going to be asked and if these operators were smart, they would know that.

Who said the inter-se transfer price was Rs 200?
Now, everywhere it has been appearing that the price at which Nirmal Kotecha is to sell his stake to PS Saminathan is Rs 200. And no one, including the company, seems to be denying that. That’s funny, if you see this notice to the NSE from the company on Dec 1. It says that after discussions with the transferee about changed market conditions, certain terms of the acquisition have been changed. The attachment then says that the date of the proposed acquisition has changed from November 28 to December 22 and the acquisition price of Rs 200 has changed to either Rs 200 or the market price, whichever is lower.

So, Nirmal Kotecha was not going to get Rs 200 a share for sure. But if this deal did go through on Dec 22, at the height of the controversy, Nirmal Kotecha would have got a price in the day’s range of Rs 68 and Rs 83. The price was just Rs 47 two weeks ago.

What do the takeover regulations say about exemption from making an open offer, for inter-se transfers? The two promoters should have been holding the shares for at least three years before the proposed acquisition. And the inter-se transfer cannot be at a premium of more than 25% of the price as determined under the regulations.

This is complicated, Who are the vested interests that Pyramid is talking about?
Pyramid claims in a letter that vested interests have been exerting ‘non-business pressure’. It also claims its share price has been hammered down on several occasions by circular trading. Have they complained to Sebi about this before or is this is a new allegation? If it is new, why have they waited till now to raise this topic?

The manner in which this whole hoax has been executed, the sophistication indicates it is not the handiwork of some small guy. And the timing indicates that it has something to do with the transfer that was to happen on Dec 22. One just hopes that investors, especially those who have lost money, get answers and the person who was behind this hoax gets punished. The onus for this is on Sebi, which perhaps can co-opt outside investigation agencies, like the Economic Offences Wing, to improve the outcome.

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