SKumars.com listing raises eyebrows

MUMBAI, APR 24: Dotcom firm, S Kumars.com, which made a net profit of Rs 14.63 lakh in the quarter ended March 2000, could face a probe by...

MUMBAI, APR 24: Dotcom firm, S Kumars.com, which made a net profit of Rs 14.63 lakh in the quarter ended March 2000, could face a probe by the market regulator Securities and Exchange Board of India Sebi on how the company got itself listed on the Bombay Stock Exchange BSE with a low public issue float.

The Kasliwals of S Kumars have been able to list the its dotcom company on the BSE with a public float of just Rs 75 lakh. SKCL, which has a capital base of Rs 25 crore, hit the capital market within six months of its incorporation with a token public offer of just Rs 75 lakh at par. The scrip made a debut at the BSE at over Rs 400 last week.

As per per the current norms, 10 per cent of a company8217;s equity capital should be issued to the public in order to become eligible for listing on the BSE. 8220;The public issue doesn8217;t even come five per cent of its capital of Rs 25 crore,8221; said a market source.

8220;We are planning to look at it,8221; top Sebi officials said when asked about how S Kumars.com got itself listed on the BSE despite allotting a substantial part of the shares to the promoters and friends.

Interestingly, the company proposed to have an initial equity capital of only Rs 3 crore and opted listing on the Pune Stock Exchange PSE. This was at a time when the Sebi has yet to come out with norms for IPOs by Internet dot.com companies and in the absence of comprehensive guidelines, other such companies are likely to follow the same route as adopted by SKumars.com

Interestingly, on the same day of allotment, the company sent a notice to all the allottees seeking their approval at an EGM scheduled for December 24 for making a bumper preferential allotment of over Rs 22 cr at par to promoters and quot;outsidersquot;. What8217;s more, even before the share certificates and EGM notice reached all the allottees, the scrip was listed and traded on the Pune Stock Exchange on December 1, 1999.

Incidentally, the public offer of Rs 75 lakh comprises only 2.9 per cent of the current equity size. The company8217;s shares got listed on the BSE on April 10.

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The exchange says that it was told that SKCL8217;s promoters hold 75 per cent of the company8217;s present equity of Rs 25.80 crore and the balance 25 per cent is with the public. But when the company8217;s actual public issue of Rs 75 lakh amounted to just 2.9 per cent of the company8217;s present equity, how the public holding was claimed at 25 per cent?

The original public stake of 2.9 per cent Rs 0.75 crore was held by about 4,350 public investors with an average holding of 172 shares per head. But the company claims to have subsequently allotted an additional 22.1 per cent, or Rs 4.70 cr, to less than 500 quot;outsidersquot; 8211; more than a dozen of them pocketed one lakh shares each 8212; under a preferential allotment! Can a preferential allotment to promoters8217; known people be considered a public float? BSE does not find anything wrong with SKCL8217;s approach. Will the exchange apply the same yardstick to others?