Sebi probe of Castex finds no evidence of stock manipulation yet
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New York/Mumbai: Market regulator Securities and Exchange Board of India (Sebi) which is probing unusual movements this year in the shares of Castex Technologies Ltd, said it hasn’t yet found any signs of wrongdoing.
Some holders of Castex’s convertible bonds complained to the Sebi in September, alleging manipulation of its shares with an aim to inflate the price and trigger conditions for a mandatory conversion of the debt. After surging almost 5% in 12 of the 16 sessions through 13 July to a record Rs.362.65, the stock slumped by the daily 5% limit in the subsequent 42 days.
“We have not found any instance of market manipulation or unfair trading practices so far,” Sebi chairman U.K. Sinha said in an interview. “If we find any evidence, they will not be spared.”
Castex’s share price tripled since the end of March until reaching the threshold that triggered the mandatory conversion. In September, the company decided to convert $137.4 million of foreign-currency debt outstanding into equities. The shares have tumbled 94% since 14 July.
John Flintham, senior managing director of Amtek Auto Ltd, a group company of Castex, said 11 September he had no knowledge of any stock-price manipulation.
Many investors have suffered significant losses “because the price of the shares remained unnaturally high only for (exactly) as long as long was required to give the company the opportunity to purport to exercise its conversion rights,” Quinn Emanuel Urquhart and Sullivan UK Llp, a law firm representing the bondholders, wrote in a letter dated 7 September to Sebi’s Sinha.
“We have received a number of complaints on the issue,” Sinha said in his office in Mumbai. “We have informed them that we are investigating this.”
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