This is an interesting story of a listed company in stock market, which was once a penny stock of 50 paise in 2009 and went straight into the Forbes list in six years.

Forbes had named Vakrangee Ltd among Asia's 200 'Best Under a Billion' companies for 2015 with market capitalisation of USD 821 million. Till January 25, 2018, with the stock price of Rs 505 per share, Vakrangee Ltd was nearly a Rs 40,000 crore company by market value.

Founded on May 29, 1990, Vakrangee is a technology-driven company and a major player in providing e-governance services such as Aadhaar biometric cards, passport and railway tickets across India.

THE FALL

Over the past eight days, the stock price of Vakrangee Ltd has crashed by almost 60 per cent and is locked in a 10 per cent lower circuit at Rs 192 per share. Due to heavy selling of shares, more than Rs 27,000 crore (market cap) of investor's money in Vakrangee stocks has been wiped out.

Vakranjee's stock price rose exponentially on January 25, 2018 only to crash later.

WHAT WENT WRONG?

Vakrangee's management in an official statement said that due to baseless news reports on Securities and Exchange Board of India (SEBI) investigation against Vakrangee for alleged rigging and manipulation of the company's share prices the share price fell.

Market analysts, however, believe there is more to the story. Many felt that the "news report of Aadhaar card's data leakage" also affected the company's value as it is the largest enrollment agency for UIDAI.

As Vakrangee's stocks plummet, high net worth individuals (HNIs) and investors have become vigilant. Some of them have started hiring "smart brains" on Dalal Street to conduct an internal investigation into the dealings in Vakrangee Ltd.

One senior stock broker told Indiatoday.in: I have got an assignment from a leading investor who has invested around Rs 200-250 crore in Vakrangee Ltd. This investor is worried if the company is bonafide, and if his investment is safe.

A market analyst said: How the company makes money, God only knows. It is a case where promoter himself gives money to people to purchase shares of his own company. Perception of Vakrangee is bad in the market, but surprisingly, the stock prices are going up without any fundamentals and big names are seen in its shareholding list.

WHAT DID SEBI DO?

According to National Stock Exchange (NSE), it had submitted three analysis reports (kind of complaint) to market regulator SEBI pertaining to insider trading and price and volume manipulation in November 2009, May 2012 and July 2016.

The third analysis report filed by NSE (the copy is with Indiatoday.in) before SEBI highlighted that during period January 2016 to June 30, 2016, a group of 22 clients related to each other as well as to the company was seen continuously buying and selling, together accounting significantly to the market gross.

"On a daily basis, the group accounted for as high as 74.87 per cent to market gross on certain days", the report said.

"The average quantity traded per day by this group of clients during the period July 1, 2015 to December 31, 2015 was 4.25 lakh shares buy and 5.19 lakh shares sell which increased significantly by almost 70 per cent to 8.05 lakh shares buy and 8.16 lakh shares sell during January 2016 to June 30, 2016," the NSE report informed. Of the 22 clients, 18 had more than 90 per cent trading activity in this scrip only.

SEBI began its preliminary enquiry. The Integrated Surveillance Department (ISD) of SEBI observed that large group of connected entities hasbeen contributing significantly to the gross traded volume, with significant percentage of trade happening among themselves and several of them having 100 per cent concentration in Vakrangee scrip only. ISD expanded the list of connected clients from 22 to 119 clients based on the available information.

After finding suspicious trading, ISD forwarded the matter to Investigation Department (IVD) of SEBI to ascertain whether there was any violation of the provisions of SEBI Act, 1992 and SEBI Regulations, 2003 in the trading by 119 suspected entities in the scrip of Vakrangee Ltd during the investigation period.

In a confidential report (the copy is with Indiatoday.in), SEBI highlighted its findings before giving a clean chit to Vakrangee Ltd. These findings were:

Total synchronised trades by the suspected entities on BSE and NSE was 12.34 per cent and 1.97 per cent of total market volume of the respective exchange during the investigation period. Thus, the percentage of synchronised trades to total market volume by suspected entities in BSE and NSE is insignificant.

On circular/reversal of trade issue, no specific trading pattern such as circular of trades/reversal of trades was observed during investigation period.

LTP contribution by suspected entities on BSE/NSE is not substantial.

No major off market transfers have been observed during the investigation period.

No adverse inference is drawn from the analysis of trading of suspected entities.

Based on findings of the investigation, it is recommended that we may not pursue the matter any further.

Queries sent to SEBI officials by Indiatoday.in remain unanswered.

SEBI CLEAN CHIT RAISES EYEBROWS

While talking to Indiatoday.in, market analysts on Dalal Street suspect foul play. Some contrasted Vakrangee's case with earlier manipulators in the stock market and how SEBI dealt with them.

In March 2009, SEBI examined the trading data of the Futures and Options (F&O) segment in the NSE for January to March 2007. It was observed that some stock brokers were buying and selling almost equal quantities of contracts within the day and such buy/sell was synchronised in nature.

"The time difference between the buy and sell order is only in seconds. Most of the orders were matched in a time gap of 1, 2 or 3 seconds and many orders have matched to the exact second i.e. time difference of zero. This is proof enough to establish the existence of synchronisation of trades", SEBI's order against Rakhi Trading Pvt Ltd said. SEBI is currently challenging this case in the Supreme Court.

A senior stock broker said that in the Rakhi Trading case, SEBI pointed out artificial trading, the same seems to be the case with Vakrangee but here the decision looks "managed".

A market analyst said, "It is a clear-cut case of price manipulation and rigging. Why has SEBI ignored (these) is questionable? I have heard that pressure is mounting on two independent directors (ex-LIC and ex-SEBI) to resign from Vakrangee's board before further action is taken against the company. How much of this is true, only time will tell."

Out of ten directors on Vakrangee's board, six are independent. Among them are Ramesh Joshi, former executive director of SEBI and Thangavelu Sitharthan, ex-Chief of Legal at Life Insurance Corporation (LIC).

If sources are to be believed, a fresh complaint was filed by a set of investors-cum-shareholders (including few FIIs) against Vakrangee Ltd in November 2017 with allegations of price manipulation. SEBI has started looking into the matter.

The Income Tax department is also keeping a close eye on Vakrangee Ltd. A senior I-T official told Indiatoday.in that "if the shareholding patterns of last 10 years (of the company) are examined, then one would find names of some entities who are not only holding majority of shares but also rigging the price on behalf of promoter".

The I-T official said, "If NSE's bulk deals are examined, then there are huge deals done by these entities, where shares were sold in crores of money. Where the money gone has gone, that needs to be investigated".

VAKRANGEE DENIES CHARGES

Replying to a detailed questionnaire by Indiatoday.in, the spokesperson of Vakrangee Ltd said, "We are not aware of any NSE report. We have not received any communication with respect to any complaint/investigation from the NSE and SEBI related to inside trading and price manipulation. The rumour of the company involvement in price volume manipulation is completely untrue and baseless."

Vakrangee denied allegations about role of independent directors in getting clean chit from SEBI.

The company said, "The independent director from LIC and Ex-ED of SEBI are respectable people with high integrity. Thus, these are completely untrue and baseless allegations".

Vakrangee claimed that it is a debt-free company. "At the peak, the company debt was Rs 1,142 crore i.e. short-term debt of Rs 750 crore and long-term debt of Rs 392 crore. In fact, we are in the process of getting the status of debt-free company updated with the Ministry of Corporate Affairs (MCA)," the company stated.