During his two day visit to the state, the chairman of Securities and Exchange Board of India (SEBI) U K Sinha expressed concern over the “worrying levels” of “Dabba Trading” or illegal trading that is happening in Gujarat and added that the market regulator will tackle the illegal activity in the state with an iron hand.
Sinha was in Rajkot to meet and address the concerns of entrepreneurs connected with the MSME sector in the state.
“I also had a meeting with brokers from Rajkot and there is one thing that has been brought to my notice. It is a matter of concern that dabba trading is rampant in Rajkot and neighbouring areas. We are concerned about it and we are going to act strictly against them in collaboration with the state government, police department and with the new powers vested in us,” Sinha said.
Dabba trading is an illegal and parallel activity, where shares of a company are traded bypassing the stock exchanges, free of all rules and regulations. The dabba operators office is like any other broker’s office having terminals linked to stock exchanges showing market rates of stocks. However, the difference is that the investor’s trades bypass the exchanges and are noted only in the books of the dabba operator. There are also no guarantees of pay-in and pay-out as there are no written contracts or invoices or bills issued. The settlement cycles are decided by the dabba operators themselves.
When asked if SEBI has any estimates of the quantum of dabba trading that happens in Gujarat, Sinha said, “I have no estimates. But the people whom I have been meeting since yesterday (in Gujarat), are telling me that it is quite rampant… it is in worrying proportions.”
“This kind of activity might be happening in other parts of the country. But the intensity here is more,” he said listing out various measures that SEBI has taken to prevent the inflow of black money into the capital markets.
Apart from brokers, Sinha along with other SEBI officials have met over 100 entrepreneurs connected with MSME units from Gandhinagar, Morbi, Wankaner, Rajkot and Jamnagar, during the last two days in the city here.
Talking about his personal visit to some of the MSME units in Rajkot on Tuesday, the SEBI chairman told a gathering of representatives from MSME units at a seminar titled ‘SME funding: Role of Capital Markets Conclave’, “There is huge potential and tremendous energy as far as entrepreneurship (in the state) is concerned… In matters of technology and marketing, you have been masters. You have been able to meet the domestic as well as the global challenge.”
Rajkot is only the second industrial cluster after Coimbatore in the country, where SEBI has held such an event.
“Some of you have expressed concerns about the cost of listing (MSME units on stock exchanges). I assure you all that we will work towards it,” Sinha said addiing that 84 MSME units (78 on BSE and six in NSE) have been listed so far. As on November 17, 2014, MSMEs have raised around Rs 750 crore through listings in MSME platforms of BSE and NSE.
Sinha also informed that 14-odd MSME units have also registered on the Institutional Trading Platform (ITP) of the exchanges, which is a platform created by SEBI for allowing MSMEs to list without an Initial Public Offer.
Officials including Sinha and Chitra Ramkrishna, MD & CEO of National Stock Exchange (NSE) who spoke to a gathering of entrepreneurs on Tuesday also emphasised the need for the MSMEs to move from sourcing finance from the banks and state financial corporations to the capital markets.
“Last decade it was easier for companies to raise money from banks. Going forward, this will not be easy as banks asses their risk weightage and tighten lending norms,” Ms Ramkrishna of NSE said.
Officials said that during the last five years, the quantum of funding to MSME units by PSU banks had grown by 23 percent Compound Annual Growth Rate.