Thread by @maheshperi

The case of Ruchi Soya gets curioser. Baba Ramdev acquired Ruchi Soya with just 1100 Crores of own funds after banks wrote-off Rs. 5300 crores and further loaned Rs.3250 crores against a pledge of the same shares to complete the acquisition.

Having cost the banks, the next likely victims can be small investors. Ruchi Soya has filed a DRHP for an FPO to dilute its holdings. The pricing of the FPO is to be discovered by the market.

Here is where the trouble begins. To curb price volatality and manipulation, Sebi mandates that companies emerging from insolvency proceedings (CIRP) must have at least a 5% upfront public shareholding.

1. The public shareholding of Ruchi Soya is less than 1%. However, SEBI has allowed trading of the stock. With little float, the price has shot up from Rs.3.5 to now Rs.1193 in an year.

2. While promoters hold about 99%, almost 99.97% of that is pledged with banks. This was for the loans banks gave to fund the acquisition.
3. The average trading in the the last 3 months for the stock is 3% of the free float. ie. 0.03% of the total equity.

4. For a company with a market cap of 35,300 Crores, the average trading value over the last 3 months is a measly Rs.11 crores.
5. With such low trading, the price shot up from 642 on 1st April 2021 to 1193 today. All this will determine the price discovery for FPO.

6. The stock is hitting upper circuit on low volumes for the past couple of days with a traded value of about Rs.5 crores.
7. At the end of the FPO, Baba Ramdev will take money from small investors to repay the banks and own 90% of the company, with negligible own investment.

Why is SEBI allowing this charade to play out? Banks have always been complicit. Stock markets are cheer leaders. Small Investors and citizens of India will be the ultimate victims.