The equity investment in PC Jeweller Ltd. was part of its treasury operations claimed Vakrangee Ltd, in an interview with BloombergQuint on Feb. 3. The investment had come under scrutiny after a local newspaper, Mumbai Mirror, reported that Vakrangee was being investigated by market regulator SEBI for alleged share price manipulation and such investments. Exchange data indicated that Vakrangee had purchased 20 lakh shares of PC Jeweller on Jan 26, 2018.
The news report prompted a steep fall in Vakrangee’s share price on Friday, Feb. 2, down 55 percent intraday, finally closing with a nearly 10 percent loss at Rs 262.65.
Dinesh Nandwana, the managing director and chief executive officer of Vakrangee denied any stock price manipulation and said Securities Exchange Board of India did not find any wrongdoing.
"SEBI, in the report, has said that no adverse inference is drawn from the investigation and may not pursue this matter any further. So we are denying any allegations of wrong doing," said Nandwana.
Nandwana said the company made a direct equity investment in PC Jeweller through a treasury fund of more than Rs 1,500 crore. When asked if this was the only such equity investment made by the company, Nandwana said it had also subscribed to HDFC Standard Life shares via the initial public offering.
"We currently have a treasury fund of more than Rs 15-16 billion. More than 70 percent of the same is invested in bank fixed deposits. Around 30 percent is allocable in equity and debt including mutual funds and direct equity. In view of this, we have done couple of equity investments such as HDFC Standard life and PC Jeweller.
Both of them are also our business partners and we therefore have good visibility on longer term business potential. Rest of all the funds is and would be invested in mutual funds and debt liquid funds, Vakrangee had said in a statement on Jan. 29.
Curiously, in a call with analysts, PC Jeweller, whose share price also took a knock on this news, denied any business relationship with Vakrangee. Yet Nandwana said Vakrangee had added the jewellery company’s logo to its presentation as it had already soft launched some of their products in Vakrangee kendras.
On Friday the PC Jeweller share price tumbled nearly 25 percent to Rs 364.25. Soon after the company said in an exchange filing that, “We affirm that none of our promoters has diluted its stake in the company and none of their shares are pledged as collateral with any institution.”
Nandwana told BloombergQuint that based on shareholder feedback Vakrangee will hereon not make any direct equity investment using treasury funds, and will invest only in debt and mutual fund instruments.
Keeping this in mind, we have released the Treasury Investment Policy with effect from Jan. 30, 2018 which states that we will not do any further direct equity investments.Dinesh Nandwana, MD and CEO, Vakrangee
But he refused to respond to Bloomberg Quint’s queries on whether the company had exited the PC Jeweller investment since then.
"The treasury department has taken a decision to liquidate all equity investments of the company. Within this quarter all investments will be sold out. Will not be able to comment of status of PC Jewelles in investments" said Nandwana.
Here are other other takeaways from the interview with Dinesh Nandwana.
Nandwana said that he did not know Ashok Kumar Gautam and Vinod Kumar Bohra and that they are not related to Vakrangee in any capacity. The Mumbai Mirror report had named Gautam and Bohra as individuals related to Vakrangee's price manipulation.
The company will issue a capital allocation and payout policy shortly on how it further intends to use cash on books.