Even Jhunjhunwala, Kalparaj own stakes in shell companies
Besides them, mutual funds and foreign institutional investors also hold stake in these cos.
The list has some known names such as Prakash Industries, Parsvnath Developers, J Kumar Infraprojects, Gallantt Ispat, SQS India, VB Industries, Gallant Metal, Pincon Spirit and Jackson Investments.
Value investors like Rakesh Jhunjhunwala and Kalparaj Dharamshi own stakes in many of these companies. Besides them, mutual funds and foreign institutional investors also hold stake in these companies.
Jhunjhunwala owned 1.01 per cent stake, or 15,00,000 shares in Prakash Industries as of June end. On a year-to-date basis, shares of Prakash Industries have surged over 200 per cent till date.
Also read: These 331 shell company stocks have stopped trading from today; do you own any?
Crackdown on shell companies: What does it mean?
Value investor Kalparaj Damji Dharamshi holds 1.60 per cent stake in SQS India BFSI.
Shell companies are dubious entities that are generally used for laundering illegal funds. However, the term ‘shell company’ is not defined under the Companies Act.
Mutual fund houses as well as foreign portfolio investors hold over 11 per cent and 27.13 per cent stake in J Kumar Infraprojects.
In a press release, J Kumar Infraprojects said, “J Kumar is not a shell company and the suspicion of the regulator is uncalled for. Our company’s compliance track record – both with the exchanges and registrar of companies – has been impeccable.”
For the year ended March 31, 2017, J Kumar Infraprojects reported total income of Rs 1,466.22 crore and profit after tax of Rs 105.51 crore.
“We do not know what is the basis or parameters that Sebi has applied. Unfortunately, that is not in the public domain, but it may happen that out of the 331 companies, maybe a few have appeared because some data was not available or because of some other mistake. If there is a mistake, Sebi will admit it and correct the position, but since we do not know what the parameters are, it will be difficult for us to say,” JN Gupta , former Executive Director, Sebi, told ETNow.
Rajesh Narain Gupta, Managing Partner, SNG & Partners said, “Sebi order has taken industry and investors by surprise. This has lead to erosion of serious wealth and if some of the companies are found to be not shell companies this order shall still be a death knell on their perception and valuation.
“Devil lies in details so we need to a deep dive on this order. It is not clear whether show cause or appropriate notice was given to these companies to justify whether these are actually shell companies or not. Some of the names appear to be good names protection of consumer interest is paramount, however, balance needs to be explored between Protection and Logical Interference,” Gupta added.