SEBI to examine rise in Bhushan Steel shares

NEW DELHI: Market regulator SEBI will look into the sudden share price rise in Bhushan Steel stocks which rose 46% from Rs 1,086 to Rs 1,576 on Monday. SEBI director Ananthraman said the regulator would study the price movement before taking any action on it.

Prior to this, a similar run was witnessed in Essar Oil scrip on November 14, when the share price jumped by 36.5% to Rs 120.80 from the previous close of Rs 88.50. The share price continued to rise in the over the next two days too, going up 30.50% and 22%, respectively. Following the spurt, on November 16, the company announced its plan to expand its refining capacity from existing 7 million ton to 34 million ton. A senior analyst said that a section of the market was aware of the company’s plan, which led to the steep rise in the company’s share price.

In the case of Bhushan Steel, the market is strife with the speculation that LN Mittal group is acquiring a stake in the steel company. Bhushan Steel is implementing a 4.5 million ton integrated steel plant in Orissa. The first phase of the plant is likely to be operational soon, while the second phase will be completed by 2009.

Bhushan Steel chief finance officer Nitin Johari, however, denied any plan of roping in LN Mittal or any other group in the company. He said that the company had no idea why the share price witnessed such a strong rally. Its market capitalisation on Monday increased by around Rs 2,000 crore to Rs 6,682 crore.

There were rumours of the company receiving an iron ore mine for its integrated steel plan but Johri denied that too. He said, there was no communication from the government on the issue, so far. A source in mining department also denied that any such decision taken had been taken so far.

In fact, on Monday, the share price went up to Rs 1,625 - a jump of over 50% from the previous closing - but later dipped to close at Rs 1576.

Promoter Brij Mohan Singhal owns 64.18% in the company. Therefore, a merchant banker said, there was no chance of any takeover bid on the company. But, a market source said 8.5 lakh shares were traded on Monday on BSE and NSE. A large number of these shares were traded at higher levels of around Rs 1,500. Therefore, a large number of investors had information of some developments in the company, which will affect its financial performance. The source said that such price rise was possible only on the basis of insider information.

In fact, because of the skewed information in the market, a broker said, many investors have lost money. He said that as the share price was quoting at all time high at around Rs 1,100, some investors sold the stocks without having any holdings, thinking that they will squure their positions by buying them back when the price fell.

The general perception was that the price would correct during intraday trading. But, the price continued to rise the whole day. Similarly, those who had sold futures would loose their fortunes if the prices does not get corrected.

source : moneycontrol