M/s. Maytas Infra Ltd.

[now IL&FS Engineering &

Construction Co. Ltd.
[Adjudication Order No.
PG/BRK/AO 124/2013]

Presentation by:
Pranav Tripathi
PGDM (Financial Market) 2016-17

12/13/16

12/13/16

Symbolic representations used in presentation

Sr
No

Short Form

Full Form

SCSL

Satyam Computer Services Ltd.

Maytas

M/s. Maytas Infra Ltd., [now IL&FS Engineering & Construction Co.
Ltd.]

SEBI

Securities and Exchange Board of India

Investigation
period

July 17, 2008 to December 16, 2008

SEBI Act

Securities and Exchange Board of India Act, 1992

PFUTP
Regulations

Securities and Exchange Board of India (Prohibition of Fraudulent

and Unfair Trade Practices relating to Securities Market)
Regulations, 2003

Rules

Securities and Exchange Board of India (Procedure for Holding

Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995

Noticee

D Srinivas Raju

SCN

Show Cause Notice

10

Spark Capital

Spark Capital Advisors (India) Pvt. Ltd.

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1. Facts of the case in brief

Event on 16 Dec 2008:
SCSL announced to acquire 51% shares of Maytas
31% from promoters @ Rs 475/20 % from public @ Rs 525/-

Observations of 17 Dec 2008:

SCSL withdrawn proposal
Maytas scrip price movement was not in sync with Index during
01 Sep 2008 to 31 Dec 2008

In light of these events, SEBI ordered investigation

between the investigation period to check if there is any
violations of SEBI Act.
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2. Appointment of Adjudicating Officer

SEBI issued the order for appointment of adjudicating officer on 25 Apr 2012.
Adjudicating officer appointed on 14 May 2012.
Name of Officer:
Piyoosh Gupta

Sections considered while appointment:

section 15 (I) of SEBI Act
Rule 3 of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties
by Adjudicating Officer) Rules, 1995

Investigation required to check violation of :

section 12A (a), (b), (c) of SEBI Act
regulations 3 (a), (b), (c), (d) and 4 (2) (e) of PFUTP Regulations

Alleged Violation by:

D Srinivas Raju
12/13/16

3. Show Cause Notice, Hearing and Reply

SCN issued to Noticee on 26 Nov 2012, seeking why
inquiry should not be held against him for violations of rule 4 of the Rules and
section 12A (a), (b), (c) ofSEBI Act and regulations 3 (a), (b),
(c), (d), 4 (1) and 4 (2) (e) of PFUTP Regulations.

Penalty can be imposed under section 15HA of the SEBI

Act.
On 26 Dec 2012 : SCN served
to Noticee on address obtained
from Noticee over telephone.

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On 10 Jan 2013 : Noticee

replied to SCN seeking six
weeks time to file reply. Noticee
granted time.

3. Show Cause Notice, Hearing and Reply (contd..)

Noticee was
granted
opportunity of
personal hearing
on 14 Feb 2013
at Hyderabad.

Noticee denied that

his sister B Radha
Raju is married to B
Rama Raju, a
promoter of Maytas.
He submitted that
his sister B Radha
Raju is married to B
Rama Raju (Sr.)
who is public
shareholder of
Maytas.

12/13/16

Mr. Vinay Chauhan,

Advocate appeared
on behalf of the
Noticee submitted
written reply dated
February 12, 2013

Noticee denied
allegations and said
he is an investor and
trading in the scrip of
Maytas.

5. Consideration of Issues and Findings

Issues that arise for consideration Whether the Noticee had violated
Section 12A (a), (b), (c) of SEBI Act and
Regulations 3 (a), 3 (b), 3 (c), 3 (d), 4 (1) and 4 (2) (e) of PFUTP
Regulations

Does violation attracts Monetary penalty under section

15HA of the SEBI Act?
Amount of monetary penalty?

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Consideration of Issues and Findings (contd..)

Both SEBI Act and PFUTP Regulations states that No person shall
directly or indirectly

buy, sell or otherwise deal in securities in a fraudulent manner

Use manipulative or deceptive device
employ any device, scheme or artifice to defraud
engage in any act, practice, course of business which operates or would operate as
fraud or deceit upon any person

Prohibition of manipulative, fraudulent and unfair trade practices

(1) Without prejudice to the provisions of regulation 3, no person shall indulge in a
fraudulent or an unfair trade practice in securities.
(2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade
practice if it involves fraud and may include all or any of the following, namely:....
(e) any act or omission amounting to manipulation of the price of a security;
...."
12/13/16

About Maytas
Incorporated : In 1988 as Satyam Constructions Private Limited
Registered office : 6-3-1186/5/A, Amogh Plaza, 3rd Floor, Begumpet,
Hyderabad - 500016.
Core business

: to develop & construct infrastructure projects

Name changed : Maytas Infra Limited' in 1998

Public issue : In Oct 2007
No of Shares : 88, 50, 000
Total amount : 327.45/- crore
Allotment price : 370/- each

Maytas scrip listed on both - BSE and NSE

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10

Significant shareholders between June 2008 and Sept 2008 remained same.
Entity

No. of
Shares

% Share holding

Promoters
SNR Investments Pvt Ltd

52,50,000

8.92

Veeyes Investments Pvt Ltd

52,50,000

8.92

Public Shareholding
Fincity Investments Pvt Ltd. *

52,50,000

8.92

Highgrace Investments Pvt Ltd.. *

52,50,000

8.92

Elem Investments Pvt Ltd. *

52,50,000

8.92

B Rama Raju * (Sr)

51,43,100

8.74

Radha Raju Byrraju *

25,75,750

4.38

B Ramalinga Raju

48,54,200

8.25

Nandini Raju Byrraju

25,73,500

4.37

B Suryanarayana Raju *

25,31,000

4.3

B Teja Raju

14,90,000

2.53

Citigroup Global Markets Mauritius Pvt Ltd

14,45,000

2.46

B Rama Raju

14,85,000

2.52

B Jhansi Rani *

13,82,950

2.35

6,62,500

1.13

Hdfc Trustee Company Ltd- A/C Hdfc Infrastructure

10,35,569

1.76

Hdfc Trustee Company Ltd- A/C Hdfc Long Term Eq

7,97,448

1.36

Hdfc Trustee Company Ltd- Hdfc Prudence Fund

8,00,000

1.36

Icici Prudential Life Insurance Company Ltd

6,84,417

1.16

B Ramalinga Raju Huf

Total

2,15,65,200

36.64

Total
12/13/16

3,21,45,234

54.63
11

Shareholding & Financials of Maytas

As on 30 Sept 2008, shareholding pattern of Maytas
was:
84.96% shares held by Promoters and related entities
8.1% held by Institutional investors
6.94% shares are free float
Quarterdata between
Revenue
(In
Net
profit
Diluted
Financial
June 2008
and
Mar 2009.
Rs. crore)

June 2008
September 2008
December 2008 *
March 2009 (Annual
results)
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(In Rs.
EPS
crore)
391.2
200.47

366.3
168.47
Not declared
Not declared
1664.2

(473.6)

3.41

2.86
Not
declared
---12

Major announcements before SCSL announced

acquisition of Maytas
Announcement 1:
Wednesday, July 23,
2008 07:05:46 PM (BSE)
On 24 July, scrip
Opened at 510 (3.19%
higher than previous close
price) and
Closed at 442.95 (10.38 %
lower than previous close
price).

12/13/16

Maytas informed Exchanges that "We

have submitted our financial bid for
the Hyderabad Metro Rail project in
consortium with partners comprising
of Navabharat Ventures Limited,
Maytas Infra Limited, Italian Thai
Development Public Company Ltd and
IL&FS, led by Navabharat Ventures
Limited. We understand our
consortium was the lowest bidder
for the
Hyderabad Metro Rail Project. We will
furnish the copy of award letter once
we receive from Hyderabad Metro Rail
Limited"

13

Major announcements before SCSL announced

acquisition of Maytas
Announcement 2:
Monday, August 11, 2008
12:20:53PM (BSE)
On 11 Aug, scrip
Opened at 425 (4.15%
higher than previous close
price) and
Closed at 419.95 (2.92 %
lower than previous close
price).

12/13/16

Maytas informed BSE that Govt of

Andhra Pradesh has vide its Letter of
Award dated 8 Aug, 2008 awarded
the Concession for undertaking the
development of the Hyderabad Metro
Rail Project on Design, Build, Finance,
Operate and Transfer (the "DBFOT")
basis to its Consortium.

14

Major announcements before SCSL announced

acquisition of Maytas
Announcement 3: Friday,
Sept 19, 2008
01:39:49PM (BSE)
On 19 Sep, scrip
Opened at 446.75 (1%
lower than previous close
price) and
Closed at 466.80 (3.43 %
higher than previous close
price).

12/13/16

Maytas informed Exchanges vide its

letter dated 19/09/2008 that "Maytas
Metro Limited", a new special
project vehicle floated to construct
and run to be built across 71 km
across three dense traffic corridors of
the twin cities. Maytas Metro Limited
today signed the Concession
Agreement with the Govt of Andhra
Pradesh.

15

Financial Analysis
One month simple averages of closing prices and volumes before and after
investigation period was as follows
Exchange

NSE
BSE

17/6/2008 to 16/7/2008

Price
438.64
435.45

Volume
11,508
2,708

17/12/2008 to
16/1/2009
Price
Volume
181.78
7,08,555
182.41
4,27,712

Promoters and related entities had outstanding loans Rs 385 cr from IL&FS group
Rs 40 cr from SICOM Ltd.

In lieu of said loans, promoters pledged Maytas shares toIFCI Ltd.,

SICOM,
IL&FS Financial Services Ltd.,
IL&FS Trust Company Ltd. and
Investsmart Financial Services Company Ltd.
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16

Financial Analysis (contd..)

Based on following assumptions related to Maytas scrip price:

i. Details of loans taken against pledged shares
ii. Terms of contract and liabilities
iii. Hinted possible interest of promoters

We reach a conclusion that

the pledges were invoked towards end of December

2008 when the price of Maytas scrip fell drastically.
Average value of Maytas share : Rs 410
Total equity capital : 5,88,50,856
. Pledged with IL&FS : 3,75,14,015
. Pledged with SICOM : 41,02,565

71% of total share capital is pledged.

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17

Financial Analysis (contd..)

Due to margin shortfall, promoters pledged additional shares to

IL&FS.
Margin call for
IL&FS
SICOM

: Rs 400
: Rs 350

Two major issues related to price manipulation:

Pledge of the promoters and related entities shares was not
public and the information, if made public, could have adversely
impacted the price of Maytas scrip.
if the closing price of Maytas fell below ` 400/-, these pledges
would get invoked and to keep these pledges intact, it appears
that the only way for the promoters was to ensure that the
closing price did not fall below ` 400/-.
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18

Financial Analysis (contd..)

This graph was used to
get metro project.
Compares share prices of
Maytas vs other
infrastructure companies.
Shows Maytas does not
lose value as much as its
peers.
Also, it is observed based
on gross buying and
selling pattern that 1/3rd
trade is done between
Raju group and Spark
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19

Financial Analysis (contd..)

Gross buyers

Gross sellers

Spark Group :

Sreenivasan Ramakrishnan
Vinay Mishra
Raji Raju
Raju Venkatraman
D. Srinivas Raju
Spark Derivatives

The Royal Bank of Scotland N.V.

Citigroup global markets mauritius private limited

Sundaram BNP Paribas

Franklin Templeton Mutual Fund

P. Suryanarayana Raju

Raju Group :
P. Suryanarayana Raju
Padma Gokaraju

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20

Conclusions
1. Knowledge of the pledge of the promoters and related
entities shares was not in public and if the closing
price of Maytas fell below ` 400/-, these pledges would
get invoked.
2. To keep pledges intact, only avenue for the promoters
was to ensure that the closing price did not fall below
` 400/-.
3. Noticee channelized the funds of promoter related
entities to deal in the scrip of Maytas.
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21

Observations
Allegation 1 Market distortion

Noticee was not directly involved with order placement/

execution decisions.
Such order placement/execution decisions were taken by
the broker, Spark Capital.
So it cannot be said that the Noticee had distorted market integrity and price discovery process by
manipulating the price of the scrip.
used his demat account unscrupulously to manipulate the price
of scrip of Maytas
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22

Obervations (contd..)
Allegation 2 - Channelizing of Funds
Noticee and Padma Gokaraju are siblings and that their sister B
Radha Raju is married to B Rama Raju, one of the promoters of
Maytas who is brother of B Suryanarana Raju (B S Raju).
It was alleged that by virtue of this relationship, B S Raju funded the
Noticee to deal in the scrip of Maytas.
Noticee denied that his sister B Radha Raju is married to B Rama
Raju and submitted that she is married to B Rama Raju (Sr.) who is
shown as public shareholder in the shareholding pattern of Maytas.
The relationship brought out between the Noticee and B S Raju has
been denied and also there is no other relationship/ link established
between the Noticee and B S Raju by virtue of which B S Raju would
have extended funds to the Noticee.
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23

Obervations (contd..)
In the absence of any relationship/ link between the
Noticee and B S Raju it is difficult to hold that Noticee
had indeed channelized the funds of promoter related
entity.
Allegation 3 Pledging of shares
Since knowledge of pledging of shares was not in public
domain and price of scrip moved from 430 to 180
without this information in public domain, so Noticee
cannot be held guilty of manipulative practices.

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24

Final Order from SEBI

Noticee was not found guilty of price manipulation and
channelizing promoters fund.
The authority does not find the Noticee liable for
monetary penalty.

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26