Sebi urged to probe rigging in bank stocks

In a letter to Sebi, Somaiya has detailed the sudden spurt in the turnover of these stocks on the bourses and their sustained price rise before the IPO opening date. The share prices fell sharply after the successful closure of these IPOs.

He said, of the three book-built IPOs, the OBC offering received only 20% of the subscription in its retail category (application for 78 lakh shares) against 35% (2.03 crore shares) reserved for small investors. The unsubscribed portion was allotted to qualified institutional buyers (QIBs) and high net worth investors (HNIs).

Somaiya said while the secondary PNB offering hit the market in March ’05, at January ’05-end, the bank’s share price was hovering around Rs 361.

The PNB issue opened on March 7 and the share price (it was already listed at the time of the offer) hit the roof at Rs 520 and on that basis, the issue price was fixed at Rs 390 per share.

However, post-issue, the share price fell heavily to touch Rs 349. The average trading turnover in the PNB counter on the NSE before the issue was just 8.42 lakh shares and turnover was Rs 30.21 crore. However, during the time of issue, PNB’s trading volume shot up to 1.17 crore shares and turnover on March 7, the opening day of issue, was Rs 582 crore. Post-issue (after March 11, when the issue closed), the turnover fell to around Rs 16 crore.

The Allahabad Bank IPO hit the market during April 6-12, and the issue price was fixed at Rs 82 per share. Pre-issue, the share price was around Rs 69 per share in February and average trading volume was 3 lakh shares on the NSE.

Pre-IPO, the price was rigged to Rs 100 per share and trading volume jumped to 38 lakh shares, he said. Post-issue, not only did the volume fall substantially but the price also dipped below the issue price at Rs 76 per share, he said.