Opinion
Bharat Global Developer: Expect unabated down circuits in the stock
Summary
- Bharat Global Developer resumed trading this morning after more than a three-month trading ban, and immediately hit the 5% lower circuit filter.
- While Sebi has lifted its trading ban on Bharat Global, the company remains under investigation as there are several gaps in its disclosures.
Shares of Bharat Global Developer Ltd (BGDL) resumed trading this morning after being suspended for more than three months and immediately hit the 5% lower circuit filter. Only about 200 shares were traded in the first two hours. But the more than 60,000 retail investors who hold about a 2% stake in the company could suffer more losses if Bharat Global’s share price declines further.
The Securities and Exchange Board of India ordered a trading suspension on BGDL on 23 December following an investigation that found significant irregularities in the company’s financials and operations. The probe was initiated because of allegations of financial misrepresentation, misleading disclosures, and price manipulation by the company.
Sebi also found that a handful of Bharat Global’s preferential allottees had offloaded their shares at inflated market prices. The regulator has frozen transactions in 98% of the company's shares as these belong to the preferential allottees, who continue to be under investigation.
Before Sebi began its investigation, Bharat Global’s share price had spiked about eight times in eight months to a high of ₹1,621 in November. The share price is currently locked at ₹1,174.85, with about 806,000 shares being offered for sale. There were no buyers.
On 26 March, Sebi, while extending its investigation until 30 June, said it would lift the trading ban on Bharat Global within two days of the company submitting provisional financial numbers for 2024-25 to the stock exchanges. The company did so earlier this week.
A pump-and-dump threat?
There isn’t much scope for good news on Bharat Global yet, as several gaps in the company’s disclosures remain, which Sebi is still investigating. These gaps include disclosures regarding certain orders the company received from potential customers and accounting for proceeds from the preferential share issue.
Sebi is also in the process of recovering ₹271.26 crore of illegal profits, which it says the preferential allotees made by selling their shares in the market by making false disclosures to the stock exchanges.
Sebi had earlier determined that several submissions the company had made to the exchanges weren’t backed up by original documents. For example, Bharat Global had said it was working on an order from the Tata group and on assignments in West Asia, which have turned out to be false.
Bharat Global’s new management has informed BSE that they were unable to trace correspondence relating to these orders. The new management took charge after Sebi barred several directors from holding any position in the company.
For investors in BGDL, their best option is to exit at the first opportunity.
At Sebi’s press briefing on 24 March, whole-time member Ashwani Bhatia said the regulator had prevented an estimated ₹22,000 crore in losses for investors by identifying and intervening in companies at the ‘pump’ stage of pump-and-dump schemes before they reached the ‘dump’ stage.
