Alok Industries relisting: Goof up or manipulation

Shares of Alok Industries relisted on the bourses after capital reduction on Wednesday. They were suspended from trading for capital reorganisation from January 30, 2020.

The reorganisation resulted in the face value of the shares being reduced from Rs 10 to Re 1. This effectively meant that a shareholder on the record date would post this reorganisation, continue to hold the same number of shares and the equity capital of the company would be reduced by 90 per cent.

The reorganised share capital of the company now stands revised to 137,73,17,895 shares of Re 1 face value totalling Rs 137.73 crore against the identical number of shares of Rs 10 face value totalling Rs 1,377.31 crore.

When suspended, the shares were trading at Rs 3.32 on BSE and Rs 3.30 on NSE. This effectively meant that a shareholder, who on record date held 100 shares, had a notional value of Rs 332 for his holdings. Post reorganisation, this got reduced by 90 per cent to Rs 33.20 theoretically.

In reality, something completely the opposite has happened. The discovered price was Rs 19 on BSE and Rs 17.70 on NSE. This meant that post the capital reduction of 90 per cent, the value of his shares has shot up to Rs 1,900 on BSE, a gain of Rs 1,578 or 472.28 per cent.

The traded volume on BSE was 20,12,133 shares while it was 17,09,158 shares on NSE. Post price discovery, shares on both the exchanges hit the lower circuit. The shares are in trade to trade for the next 10 trading sessions, which implies that each transaction has to be settled and no netting off the position will be allowed.

They were locked 5 per cent lower at Rs 18.05 on BSE and Rs 16.85 on NSE. The weighted average of the day was Rs 18.78 on BSE and Rs 17.08 on NSE, implying that post price discovery, the volume has significantly reduced.

One wonders whether the exchanges could have ensured a better price discovery through the price mechanism system available and made it fair for the investors.

With no value available to buyers of shares at this price, it would be fair to assume that the down circuit would continue for a few days at the bare minimum.

(Arun Kejriwal is the founder of Kejriwal Research and Investment Services. The views expressed are personal)-IANS