In an earlier piece, I had reported that the MMB punters are speculating that the savage fall in the price of Sharon Bio-Medicine’s stock was caused by a lender selling off pledged shares to recover the dues.
The punters are right. Today, Asha Mohan Kala, promoter of Sharon Bio-Medicine, filed a declaration stating that Axis Bank has invoked a pledge created by her with respect to the shares of Sharon.
Asha Kala has stated that she holds 61,38,600 shares in Sharon (5.81% of the equity) of which 50,00,000 (4.74%) are encumbered. Of this, Axis Bank has invoked the pledge on 3,68,871 shares on 15.12.2014. The balance pledged shares held by Axis Bank are 46,31,129 shares.
It is obvious from the severe nature of the fall in the stock price that much more than 3,68,871 shares have been sold by Axis.
Under Regulation 31(3) of SEBI (SAST) Regulations 2011, the disclosures have to be made with seven days of the invocation of the encumbrance.
So, we have to brace ourselves for more such disclosures to come.
One possibility is that Asha Mohan Kala may have pledged her shares so as to be able to buy more shares of Sharon. She may have dumped her own shares as well in a desperate bid to raise funds to pay off Axis Bank.
The one relief point is that this crash in the stock price is not related to the fundamentals of Sharon Bio-Medicine.
At this stage, we must note that Daljeet Kohli is probably the victim as well. When he diligently checked with the management as to whether anything is wrong with the Company, they told him everything is “normal”. In fact, on the date that Daljeet made the inquiry (16th December), Axis Bank had already invoked the pledge (on 15th December).
So, we have to give Daljeet the benefit of doubt. His recommendation is/was based on Sharon’s fundamentals. He could never have anticipated that Asha Mohan Kala would be so reckless as to cause invocation of the pledge and the severe loss of shareholder’s value and confidence.