SEBI probes Castex Technologies over bond conversion

Reuters Updated - January 22, 2018 at 08:37 PM.

India's market watchdog has started a probe into auto parts maker Castex Technologies, after investors alleged it manipulated its stock to trigger the conversion of bonds into equity, a source with direct knowledge of the matter said.

Castex's stock price more than quadrupled in the three months to end-June, triggering the mandatory conversion of $130 million of bonds into company equity. The shares subsequently fell sharply.

The company was not immediately available for comment on Friday. Last week it denied in a stock exchange filing that it had engaged in "unfair practices", submitted after local media reports of bondholder claims about share price moves.

The allegations against Castex throw a spotlight on the quality of corporate oversight at a time when India is campaigning to attract billions in foreign cash to fuel its economic recovery.

"We have received complaints and are looking into whether there is evidence of any wrongdoing," said the source, who declined to be named as the case is not public.

He said the Securities and Exchange Board of India (SEBI) had asked for detailed trading data of the company's shares from the stock exchanges and will now analyse the data.

A representative for the regulator was not immediately available for comment.

According to a 2012 covenant, conversion of the Castex bonds, originally due in 2017, would be triggered if the company's shares traded above a certain threshold for a month.

The stock soared from April to June but lost 90 percent of their value from a peak of Rs 363.1 on July 13. Bondholders complained to regulators, alleging that the company had artificially boosted the price to trigger a mandatory bond conversion and reduce its debt burden.

London-based law firm Quinn Emanuel Urquhart & Sullivan, which represents the Castex bondholders, accused the company of manipulating its stock in a letter sent to SEBI and reviewed by Reuters.

SEBI has stepped up its fight against market manipulation but Castex bondholders criticised its lack of response to the sharp rise in the company's shares.

"What the regulator should have done very early on is suspend the trading of the stock," East said.

Published on September 18, 2015 12:46