Tayal group stocks drop on Sebi order

Companies promoted by the Tayal group, the majority shareholders of the Bank of Rajasthan, dropped an average of nearly 4% on Tuesday after the Securities and Exchange Board of India (Sebi) passed an order banning 100 entities linked to the group from the securities market for alleged malpractices.

While Bank of Rajasthan was down 6.66%, stocks such as Eskay Knit India, Krishna Lifestyle Techno, KSL & Industries and Jaybharat Textile & Real Estate dropped in excess of 4%.

According to the market regulator’s order issued on Monday night, the alleged malpractices took place between June 2007 and December 2009. Sebi had launched an investigation following a reference from the Reserve Bank of India.

According to Sebi, the promoters had conveyed that they were reducing their shareholding in Bank of Rajasthan from 44.71% in the quarter-ending June 2007 to 28.61%, in December 2009 to comply with a RBI directive to reduce stake.

However, they actually increased it to 55.01% through multi-layered transactions and front companies, Sebi said.
The increase in shareholding was also in violation of takeover norms, it noted.

The regulator during the investigation had identified four distinct groups operating in the shares of Bank of Rajasthan.

They included promoters of the company, other Tayal group companies and two entities known as the ‘Yadav group’ and the ‘Silvassa group’.

Sebi said it discovered that several of the entities involved in the transactions had Girish Yadav, Sangeeta Sawant or both as directors. These companies primarily acted as conduits for transferring stock to another group of front companies.

The 35 entities comprising the Yadav group transferred Bank of Rajasthan shares to 34 Silvassa-based entities which held the shares on behalf of the promoters. The apparent role of the Silvassa group was to accumulate shares through off-market receipts, Sebi said.

There were also inter-firm transfers of funds to the accounts of other corporate bodies which had purchased a stake in Bank of Rajasthan with most of those companies sharing the same contact details as that of the various Tayal group companies.
In some cases the directors too were common.

The order passed by K M Abraham, wholetime member of Sebi, has given the barred entities 21 days to file any objections they have to the action taken against them.

The Sebi order comes on the back of the RBI fining the Bank of Rajasthan Rs 25 lakh for violation of banking norms in February.
Meanwhile, the Bank of Rajasthan distanced itself from the controversy, saying that Tayals were technically not the promoters, according to a Press Trust of India report.

“Legal opinion has been obtained that they are not the promoters...the bank doesn’t consider them as its promoters...they are just dominant shareholders in the bank,” Bank of Rajasthan’s managing director & CEO, G Padmanabhan, said.

The bank was still studying the order and would come up with appropriate response later, Padmanabhan said.