From one bedroom, Bhupendra Panwar builds a tower of companies; Cos now under lens for Gitanjali investments
From one bedroom, Bhupendra Panwar builds a tower of companies
Bhupendra Panwar, a medium-built man in his mid-thirties, resides in a 1-BHK flat in Padmavati Apartment, a nondescript building in the far-flung Mumbai suburb of Bhayandar. His home resembles any middle-class household with modest means. What Panwar does for a livelihood is unclear, but he shares his address with over a dozen companies that have invested close to 100 crore in the shares of Gitanjali Gems, a scrip that is now under the glare of capital markets regulator Sebi.
Who really is Panwar? How does a string of little-known investment companies bear the same address as that of his Bhayandar flat? Panwar's reply is as perplexing as the findings emerging out of a probe by National Stock Exchange (NSE). "My job is to create and sell companies... yes, I have created all these companies but I don't remember whom I've sold them to. I don't know what they're into," a poker-faced Panwar told ET.
The question that goes abegging is why did these companies whose net worth is just a couple of lakhs invest crores in Gitanjali GemsBSE -4.98 % shares. For instance, Trusha Infrastructure, one such entity, was formed to carry out civil construction work while Sarvin Mercantile, another firm, was registered for export-import business, according to their memoranda of association. It is not known who funded these firms to invest crores in Gitanjali Gems.
Panwar's method of functioning is simple. Create and register companies as private limited entities with a few of his friends as directors and then sell the firms with their directors resigning shortly after. This was the origin of most of the companies barred by Sebi on Friday. These entities were created with share capital of 1 lakh.
On Thursday evening, NSE barred Gitanjali Gems' promoter Mehul Choksi, broker Prime SecuritiesBSE -4.90 % and 24 other entities that dealt in shares of the jewellery company from trading in stock market for six months.
Share Decline Started in Mid-April
NSE, which is investigating the unusual volatility in the Gitanjali stock and its subsequent crash, has disabled the unique client codes for the 26 entities - many of which were created by Panwar -- that actively traded in the Gitanjali counter.
Gitanjali's share decline started in mid-April when N Jayakumar of Prime Broking defaulted in payments to the exchange after his mid-cap investment and derivatives bets went awry. The bourse warned Prime Broking that it would sell 20 lakh shares of Gitanjali Gems given as collateral in lieu of margin to trade on derivatives.
This was followed by two of the entities -- Trusha Infrastructure and Sarvin Mercantile - filing FIRs on April 27 against Prime Broking alleging that the shares owned by them were illegally put up as margin with NSE to play on the F&O segment.
After initial investigation, police froze the Gitanjali Gems shares which were pledged by Prime with NSE. The exchange wanted to sell the shares after Prime Broking defaulted in payments of around Rs 100 crore to counterparties to its Nifty options trades. To get the freeze lifted, NSE has moved the Mumbai High Court against the police.
Who really is Panwar? How does a string of little-known investment companies bear the same address as that of his Bhayandar flat? Panwar's reply is as perplexing as the findings emerging out of a probe by National Stock Exchange (NSE). "My job is to create and sell companies... yes, I have created all these companies but I don't remember whom I've sold them to. I don't know what they're into," a poker-faced Panwar told ET.
The question that goes abegging is why did these companies whose net worth is just a couple of lakhs invest crores in Gitanjali GemsBSE -4.98 % shares. For instance, Trusha Infrastructure, one such entity, was formed to carry out civil construction work while Sarvin Mercantile, another firm, was registered for export-import business, according to their memoranda of association. It is not known who funded these firms to invest crores in Gitanjali Gems.
Panwar's method of functioning is simple. Create and register companies as private limited entities with a few of his friends as directors and then sell the firms with their directors resigning shortly after. This was the origin of most of the companies barred by Sebi on Friday. These entities were created with share capital of 1 lakh.
On Thursday evening, NSE barred Gitanjali Gems' promoter Mehul Choksi, broker Prime SecuritiesBSE -4.90 % and 24 other entities that dealt in shares of the jewellery company from trading in stock market for six months.
Share Decline Started in Mid-April
NSE, which is investigating the unusual volatility in the Gitanjali stock and its subsequent crash, has disabled the unique client codes for the 26 entities - many of which were created by Panwar -- that actively traded in the Gitanjali counter.
Gitanjali's share decline started in mid-April when N Jayakumar of Prime Broking defaulted in payments to the exchange after his mid-cap investment and derivatives bets went awry. The bourse warned Prime Broking that it would sell 20 lakh shares of Gitanjali Gems given as collateral in lieu of margin to trade on derivatives.
This was followed by two of the entities -- Trusha Infrastructure and Sarvin Mercantile - filing FIRs on April 27 against Prime Broking alleging that the shares owned by them were illegally put up as margin with NSE to play on the F&O segment.
After initial investigation, police froze the Gitanjali Gems shares which were pledged by Prime with NSE. The exchange wanted to sell the shares after Prime Broking defaulted in payments of around Rs 100 crore to counterparties to its Nifty options trades. To get the freeze lifted, NSE has moved the Mumbai High Court against the police.
Though all the domestic mutual funds have stayed away from this company, state-owned insurance LIC gradually bought 4.36% stake during June 2012 to March 2013.
Gitanjali shares, which were trading at Rs 600 apiece in April-end crashed to Rs 109 on Friday with continuous lower circuit, wiping out nearly Rs 5,000 crore in market capitalisation. Value of Gitanjali shares held by NSE declined from Rs 120 crore to Rs 21 crore during this period.
The entities facing NSE ban include Albers Diamonds, Avtar Gems, CLT Investment, CSA Holding, Facet Electronics, Fender Mercantile, Jaiwanti Mercantiles, Jinal Infratech, Jinal Mercantile, Magnifique Gems, Manoj Madhav, Mehul Choksi, Pinky Agro, Prime Research, Prime Securities, Primesec Investments, Rhoda Infrastructure, Rishabh Technomarine, Sadhiv Mercantile, Sancheti Properties, Sarvin Mercantile, Shraddha Garments, Sneaking Infrastructure, Somerset Infrastructure, Trusha Infrastructure and Vankars Gem & Jewelleries.
Gitanjali, like other diamond houses andgold merchants, has been facing difficulties following the Reserve Bank of India's recent restrictions on gold imports. Bankers are also reviewing exposure limits to many diamond houses, which traditionally operated on a high leverage.
An email sent to NSE, Gitanjali Gems, Trusha Infrastructure and Sarvin Mercantile did not elicit any response till the time of going to press.
Gitanjali shares, which were trading at Rs 600 apiece in April-end crashed to Rs 109 on Friday with continuous lower circuit, wiping out nearly Rs 5,000 crore in market capitalisation. Value of Gitanjali shares held by NSE declined from Rs 120 crore to Rs 21 crore during this period.
The entities facing NSE ban include Albers Diamonds, Avtar Gems, CLT Investment, CSA Holding, Facet Electronics, Fender Mercantile, Jaiwanti Mercantiles, Jinal Infratech, Jinal Mercantile, Magnifique Gems, Manoj Madhav, Mehul Choksi, Pinky Agro, Prime Research, Prime Securities, Primesec Investments, Rhoda Infrastructure, Rishabh Technomarine, Sadhiv Mercantile, Sancheti Properties, Sarvin Mercantile, Shraddha Garments, Sneaking Infrastructure, Somerset Infrastructure, Trusha Infrastructure and Vankars Gem & Jewelleries.
Gitanjali, like other diamond houses andgold merchants, has been facing difficulties following the Reserve Bank of India's recent restrictions on gold imports. Bankers are also reviewing exposure limits to many diamond houses, which traditionally operated on a high leverage.
An email sent to NSE, Gitanjali Gems, Trusha Infrastructure and Sarvin Mercantile did not elicit any response till the time of going to press.
Source : By Rajesh Mascarenhas & Ram Sahgal, ET Bureau
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