KGN Industries' share price zooms over 177,000 percent on day of relisting; Probe ordered

Shares of KGN Industries zoomed 177,115.19 percent to settle at Rs.15,001 on Wednesday after touching an intraday high of Rs.55,000. All this, with only 827 shares having changed hands.

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The shares which closed at Rs.11.85 on June 8, 2001 (before trading in the company's stock was suspended after it failed to fulfill compliance issues with the exchange), zoomed 177,115.19 percent to settle at Rs.15,001 on Wednesday after touching an intraday high of Rs.55,000. All this, with only 827 shares having changed hands.

In other words, at close on Wednesday, each share of KGN Industries, which reported a profit of Rs.1.51 crore (approx. $3,59,523) and a turnover of Rs.250 crore (approx. $59.52 million) was valued more than those of blue-chip companies like Reliance Industries (Rs. 2667.90), Larsen & Toubro (Rs.2993.80), Grasim Industries (Rs.2323.10), TCS (Rs.963.95) and Infosys Technologies (Rs.1871.25) combined.

In, fact, at Rs.55,000, KGN Industries has broken the record of MMTC (Metal and Mining Trading Corporation) which is the most expensive scrip on the bourses at Rs. 27,050.

Naturally, sensing foul play, trading in the counter was ordered by the Exchange to be suspended at 12.20 pm as a "proactive surveillance measure."

"During the early hours of trading, it was discovered that orders were being placed at an unrealistic price. In order not to distort the price discovery process, as few orders were being placed at unrealistic prices, the trading of the scrip was suspended at 12.20 hours as a proactive surveillance measure," BSE said in a release.

Pleading innocence, Mahesh Baser, finance manager at KGN Industries, said he was as much in the dark as any investor. "I made at least three calls since morning to the BSE to find out what's happening," he said. "I was as much in the dark as they (investors) were, and couldn't help much."

Individual shareholders of KGN have a stake of just 1.43 percent while almost half, or 49 percent, is held by the promoter group. The remaining 49.5 percent is with domestic corporate bodies. And, with no price bands on shares on the opening day of trading in order to allow price discovery, anyone could have bought and sold at the unrealistic price.

KGN Industries chairman Ismail Memon and his son, Arif Memon, who is the managing director, could not be contacted. Both father and son are said to be traveling overseas.

KGN Industries was earlier called Royal Finance and was a non-banking finance company (NBFC). However, according to Baser, the Ahmedabad-based company has now surrendered its NBFC license and has transformed itself into a castor oil trading company, engaged in the business of trading in agro commodities like castor seeds, edible oils like soyabean oil, palm oil, non edible oils like petroleum products, lubricants, used oil.

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