A Case Study on Nutek India Limited, regarding Deep Fall in Share Price

ABSTRACTManipulating the security price is an act of artificially inflating or deflating the price of a security. Generally, manipulation is defined as a series of transactions designed to raise or lower a price of a security or to give the appearance of trading for the purpose of inducing others to buy or sell. In essence, a manipulation is intentional interference with the free forces of supply and demand. In this paper we have tried to study the reasons behind drastic fall in share price of Nutek India Limited.Keywords: NTIL, Nutek, Price Manipulation, GDR, SEBI.1. INTRODUCTION:NTIL is a telecom infrastructure services company providing rollout solutions for both fixed and wireless telecom networks. NTIL provides expertise in turnkey site build, active equipment implementations, operations & maintenance and technical support services. The company's core expertise lies in the breadth of services it offers in the telecom infrastructure space. It offers services to telecommunication equipment manufacturers, telecom operators as well as third party infrastructure leasing companies in installing and maintaining telecom network equipment & Infrastructure. NTIL is also involved in creation of In-building networks for the Wireless and Data Applications. Its client list constitutes all the prominent players in the telecom industry that includes Third Party Infrastructure Leasing Companies (like Indus Towers, Quippo, WTTIL), Telecom operators (like Airtel, Vodafone, Idia, Reliance Communications, Aircel) and Telecom Equipment Manufacturers (like Ericsson, Nokia Siemens Network, Huawei, ZTE, Motorola)[16]. 2. FACTS:The share was listed at 192 rupees with FV 10 on 27th August 2008. In the mean time, splitted the FV to 5.00 (on 23rd December, 2009). The price of share fallen drastically from IPO listing price, Rs 192 to all time low of Rs 0.65 in BSE[12] and Rs 0.70 in NSE[13] on 25th Nov 2011. The book value of the share is Rs. 32.3. FACTORS:Following are some factors which could be the predictors to detect the factual reason of drastic downfall in the stock price. (i) Price Manipulation by Operators:The bulk/block deals data is given below (Table 2) from NSE[13] since beginning of IPO and for the past one year from BSE[12]. Upon carefully analyzing the data, it is evident that following traders/individuals might have deliberately attempted to manipulate the share price while trading. (ii) GDR Dumping:In the process total share capital increased by 12 cr and money close to Rs 316 Cr was raised by the company. During first GDR proceed, GDRs seem to have been issued at discounted prices in comparison to Indian market price, whereas the second GDR proceed looks to have been issued on par with the then market price.Money raised through GDRs at an average price close to Rs 30 per share. Total GDRs raised were 12 Cr share equivalents. Then price started falling down and ultimately saw its bottom at 65 paise on 25th Nov 2011.Price was manipulated downward while GDRs were being dumped in to the market. On 2nd Nov 2011, only 16.76% of GDRs were there with the custodians. Shares available at dirt cheap prices were accumulated and being converted to GDRs now. From 2nd Nov till date, GDRs with custodians has increased from close to 17% to 61%. GDR data as updated on 15th March 2012, it has increased from 52.07% to 61% of total share capital. In terms of total GDRs, it is 78.58%. Current share equivalent of GDRs is 9,429,951 out of 12 Cr total GDRs raised and against total share capital of 15,45,18,600. Without any surprise, the latest GDR holding is 61%, The detail are shown in Table 4 below:According to Table 3 & 4, one can predict that GDRs were dumped at higher levels and bought back at dirt cheap prices. Now the question arises: Why does a GDR share holder sell at price less than the buying price and why does he again try to buy at much lower levels? …