11 Apr 07 Gremach Infrastructure falls below its IPO issue price
Gremach Infrastructure Equipments & Projects closed the day at Rs 83.95, which is a discount of over 2% over its IPO issue price. The stock debuted at Rs 92 but it soon hit a low of Rs 80.70 after registering a high of Rs 100. Over 1 crore shares changed hands in the counter on BSE. Gremach Infrastructure Equipments & Projects had priced its IPO at Rs.86 which was the higher end of the revised price band of Rs 72 to Rs 86 per share. The company had to revise its price band after it received poor subscription.
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There is a quiet scam in the markets which most have missed. A scam that can still be arrested before it blows on our collective faces. Gremach Infrastructure and Projects – Equipment leasing to profit from India’s impending economic boom. SEZ’s on the west coast. Port in the East Coast. Oil drilling Rigs from China. Coal fields in Mozambique … The company, at first glance, and certainly from the reports in the net, seems to be some wizard creating wealth by sheer magic. Research reports recommending strong buys are choking the net. Blog spots eulogizing the next multi bagger too are numerous. Reports of one fantastic claim after the other are all over the place. Analysts, Institutions,
Bankers,Investors all seem to have been beaten by the euphoria that is Gremach Infrastructure.
But what exactly is Gremach? Why is the fairy tale without, even a wart? Why are the promises always so bold and how do they exactly replicate, without failure, what sounds like music to the greedy ears? And why is there always a smoke screen, once one seeks to venture beyond the opening lines? Is it really some boon from above? Or is it some very smooth operator at play? I decided to take a hard look at the facts behind the rose tinted initial opening lines.
The company came out with a public issue in March 2007 with an issue size of about Rs 58 crores (USD 15 million) on book building process. However, based on the fundamentals, the issue did not evoke good response from the investing fraternity and the promoters were forced to extend. One reason that analysts had then pointed out was the fact that 83 percent of the company’s income came from hiring and giving equipments on rent , that on a cursory glance, looked like fictitious assets – an obvious indication that the turnover and income,was managed. However, to cut a long story short, the issue was “managed” and some how subscribed.
Stock market watchers will vouch, in such cases, issues are sold to “operators” who subscribe at a steep discount – the difference being paid by the promoters in cash (obviously taken out of Company’s Balance Sheet). And the same must have happened to Gremach too, accusing fingers being pointed towards market manipulators. To bolster their claims, they pointed out that in case of Gremach, only 8 entities were allotted 56.37 % (3695632) approx, out of the total issue of 65,55,554 shares. On close scrutiny, the same market experts pointed out, this group of eight looked either the same set of persons or persons acting in collusion. And to lend credence to their theory, they point at the abnormally steep upward curve the scrip’s price has shown since allotment defying all fundamentals.
Then came the spate of fantastic claims. Claims with constant hikes in the share price with a view towards attracting newer and newer gullible investors to enter the scrip at higher and higher price levels. Proof? Simple – take a look at the holding pattern again. Institutional holding went up as, institutions, who held 8.86% in June 2007 increased their stake to 19.62% in September 2007 (up 10.76%). And where did these shares come from? From bodies corporate who, in the same period, decreased their holding from 27.82% to 17.54% (down 10.28 %). What is an even bigger oddity is the fact that even in the present, the company has only 5994 shareholders (as on 31.12.2007 as per the BSE website)
I will not go into the question as to what attracts the institutional investors? Sheer gullibility or absolute greed? The fact remains, they have been had and the promoters of Gremach have rogered them all, royally. Imagine, a scrip that had a few takers at sub hundred levels when its issue came, without having any performance to bolster its claims and without any concrete reason has got the so called analysts scampering for more. And now you have overseas FCCB’s. Wow!
With a Net Worth of USD 8 million on 31.03.07 how does one even think about investing 75% in the 11 coal licenses in the so-called mines (value claimed to be over USD 100 million) and then a further US $ 1 Billion (Rs 40,000 million appx) in the oil rigs? Are you, analysts listening? Another oddity. Strangely, the company with a current Market Cap of USD 150 million has its Registered Office in Kolkata. Nothing Strange in that, except the fact that the office is perpetually locked. Even stranger is the fact that the company’s own website http://www.gremach.com does not mention the Registered Office’s address, though it mentions a spate of offices including one in Mumbai.
Forty oil rigs from China. 11 coal mines in Mozambique – all in thin air.
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