Scam Piramid

The Project Report On Capital Market Scam Of Pyramid Saimira Theater

SUBMITTEB TO

SUBMIT BY

Prof. Aman Agarwal

Gaurav Kumar 4108051051

Introduction The case is based upon the fraud

act done by a company promoter to hike the

price of his company and take the advantage of share prices hike by selling his stake on high prices as well as raising the company valuation based on share prices in NSE. The company announced that SEBI had asked to make an open offer to acquire 20% of shareholding at a price of more than four times the ruling market price. The information was passed through media. The purpose was to disseminating false information and manipulating the share price of the company.

Persons Involved In the scam the company promoter, the SEBI person and the media person were main accuse. P S Saminathan, the promoter of digital cinema chain Pyramid Saimira, stock market operator Nirmal Kotecha in the Securities Exchange Board of India (SEBI) & journalist Rajesh Unnikrishnan who works with India's leading pink newspaper Economic Times were the main accuse. While some other persons were also involved in the scam 16 individuals and 232 other entities were also banned from participating in any form of share transactions for their involvement in the scam, which caused huge fluctuations in Pyramid Saimira’s share price in December2008 last year.

Act of Forgery The company was sent a forged letter of SEBI asking Saminathan to make an open offer to minority shareholders. The company, based on this forged letter, announced that SEBI had asked Saminathan to make an open offer to acquire 20% of shareholding at a price of Rs 250/share, more than four times the ruling market price. The order pertained to a forged letter, purportedly from Sebi to Saminathan, allegedly ordering him to make an open offer under the Sebi takeover regulations for an additional 20 per cent stake, at a price not less than Rs 250 per share. Pyramid Saimira chairmn and MD P S Saminathan announced on Dec. 22 through an offer of acquisition of share of the company at a price of 250 per share. The sale was to influence the Minority shareholders. Reporters who called that number were told that the company had indeed received a letter from Sebi. This led to many a number of media reports which sent the share price up. K.M. Abraham, whole-time member of Sebi, said it was necessary to intervene immediately, “in view of the grave emergency arising out of the fact that a forged letter was sent.” The market regulator on the very next day dec 23 had clarified that no order or letter had been issued by it to Saminathn on Dec. and said letter was being circulate with ulterior motive. The letter was sent to various media organizations with the help of Sharma and Unnikrishnan. The matter came under investigation of SEBI. The market regulator today came out with the order alleging Kotecha, Saminathan and others prima facie guilty of the offence. This letter sent on December 22, 2008 had resulted in a major jump in share prices and the group had benefitted from this jump, according to SEBI. . Kotecha was a major seller in the Pyramid Saimira scrip on December 22, 2008, the day the news broke. He sold 15,05,862 shares on market at an average price of Rs. 75.85 per share on that day.

It is seen that out of the same, he sold 6,69,611 shares on BSE and NSE at an average rate of Rs. 80.92 per share on December 22, SEBI said in a statement. Nirmal Kotecha, associates of PSTL holding 12.92 per cent stake, was identified as the beneficiary of the forgery. Kotecha was also found to be using a large number of front accounts including his related persons/ entities to manipulate the securities market and to route the funds through several layers and this prima facie appears to be a money laundering activity.

The Stake pattern in company Kotecha was one of the largest shareholders of Pyramid Saimira and is considered the biggest beneficiary of the price manipulation caused by the letter. Kotecha had resigned from the board of Pyramid Saimira last November. As of January 9, 2009, Kotecha held just 67,502 shares representing 0.24% as against his holding of around 24% last September. So he had offloaded most of his stake between September 2008 and January 2009.In fact, before the IPO of Pyramid Saimira in December 2006, Kotecha held 8.48 million shares representing 42% stake as a person acting in concert. Interestingly, the publishers of The Economic Times, Bennett Coleman and Company, were also listed as holding 1.77 per cent stake in Pyramid Saimira as of December, 2008 although the exhaustive investigation report made it clear that the reporter was acting in his individual capacity.

Role of SEBI in this case Market regulator SEBI on Thursday banned 5 persons, who are allegedly involved in the Pyramid Samira case, from buying and selling shares

in capital markets for 3 years after the watchdog found they had cornered employee quota shares of the company by pretending to be on its roles. Five persons, who allegedly acted in collusion with the Pyramid Samira Theater Limited (PSTL), have also been asked to surrender the money they made by obtaining employee quota shares along with an interest of 20 per cent. These persons, SEBI order further said, would be banned for seven more years from buying and selling shares if they fail to surrender the “unlawful gains” made by acquiring shares during the initial public offer (IPO) of PSTL which hit the market in December 2006. Stock markets regulator Securities and Exchange Board of India (Sebi) on Thursday barred the promoter- chairman of entertainment chain Pyramid Saimira Theatres, P.S. Saminathan, and four others from the securities market for forgery, disseminating false information and manipulating the share price of the company. K.M. Abraham, whole-time member of Sebi, said it was necessary to intervene immediately, “in view of the grave emergency arising out of the fact that a forged letter was sent.” Sebi has also prohibited Keynote Capital Ltd, a Sebi registered stock broker, from giving recommendations in respect of companies listed in any of the recognized stock exchanges till further orders. It also asked two brokers, India Capital Markets Pvt Ltd and Dynamic Stock Broking (I) Pvt Ltd, from entering into fresh agreements with new clients till further orders.

Conclusion Throughout the case it is found that majored shareholder of the company planed o take some unfair advantage of share movement. While the fake letter was send by Mr. Kotecha and the announcement was made by the chairman of the company that SEBI asked to make an open offer at 4 times high. When the stock price

jumped to double sold the stake to public at very high price and the cheated by wrong information through announcement and media.

Share Price Movements The price movement is showing the major fluctuation of share price of Dec. 19 and Dec. 26 prices where the huge price fluctuation had taken place. Now after the volatality in share prices the havy lot of share were sold in the market by Kotecha and the Colman co. causes fall in price to the level of closing price of 40. The movement shows how the investor were cheated with the price fluctuations.

With this graph we can compare that how the share was outperforming in the market and after the case was open the sharp decline in prices pull the market to base with sensex movements.