New Delhi: Kotak Mahindra Group MD Uday Kotak on Friday said it will be tough for stock exchanges to decide whether to stop trading in the Satyam scrip, which has fallen by over 95% in a matter of two days’ trading on the NSE.
“It is a pretty tough judgement to say whether you stop trading or not ... These are path-breaking events ... in a way events which Indian capital markets had not seen till now,” Kotak told reporters on the sidelines of a CII function.
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“(An) argument could be the moment you stop trading, you run the risk of illiquidity...Here at least that there could be a different kind of bets being taken by investors...,” he said.
Kotak said nobody really knows what is going on inside the company. “I am sure regulators are focused on it and will come out of the situation pretty quickly,” he added.
Trading in Satyam Computer ADRs was halted on the NYSE on 7 January after the scrip fell by over 90% in pre-trading.
In India, the trading has not been halted, even though the scrip fell from as high as Rs188.70 before the announcement of financial wrong-doing by Satyam Computer’s founder chairman B Ramalinga Raju, to Rs39.95 on 7 January.
Today, the scrip fell as low as Rs11 and is now ruling at Rs21.60 on the BSE. On the NSE, it fell to the sub-face value at Rs6 intra-day on Friday.
Circuit filters did not come into operation as Satyam was a bluechip scrip and only on Thursday it was taken out of the Sensex.
Kotak said the investing community should also have to take criticism as it rewards companies, promoters and management who have the ability to manage the system.
To a query, he said for any potential buyer the more appropriate way would be to look at the operating business of Satyam.
“Obviously the buyer would try and protect himself from any liabilities coming out of various quarters. From the point of view of (the) equity investor, (the) issue is whether there would be any equity left after that,” Kotak said.
He said Kotak Securities, the equity research firm of the Kotak Mahindra group, has pointed out the fact that Satyam Computer was keeping a huge amount in current accounts.
“Why should any company keep such a huge sum in current accounts and not earn interest on it,” he said.