Vakrangee Ltd. down 85% to 77.50, SEBI initiates prove into PwC report

First a brief apprehension on the definition of a business model of Vakrangee Ltd. Vakrangee is a conventional technology center which facilitates the use of digital tools for the rural areas. Vakrangee also indulges into the management of white-labeled ATMs for private and public sector undertaking. Apart from this, Vakrangee deals in bullion & jewelry.

The prices of Vakrangee Ltd. yesterday plummeted 84% down to INR 81.50 / share. Today, the shares have tanked a further 5% down to 77.50. The market capitalization of Vakrangee Ltd. has shrink-ed to INR 86 billion, down by INR 450 billion.

The reasons why Vakrangee is falling:

  1. Shares traded of PC Jewelers – On 25th January Vakrangee Ltd. bought 20 lakh shares of PC Jeweler at Rs. 561.71 / share, the valuation of the deal amounting to Rs. 112.32 crores.
    1. This deal raised eyebrows because of a potential stock-price manipulation as alleged by a report in Mirror Now.
    2. Kishor Ostwal, CMD, CNI Research also raised concerns on why an IT company would show interest buying shares of a Jeweler?
    3. Vakrangee in it’s treasury investment policy had claimed that direct equity investment by the company will not be permissible.
    4. An NSE analysis report of trading of Vakrangee scrip between January 1, 2016 and June 30, 2016, showed that a group of 22 clients related to each other as well as to the company were continuously buying and selling the scrip, accounting for 74.87 per cent of market gross on several occasions.
  2. Pricewaterhouse Coopers resigned as their auditor – Price Waterhouse was appointed by Vakrangee in September last year.
    1. On 28th of April 2018, PwC, one of the Big Four auditors, resigned from Vakrangee alleging discrepancies.
    2. “Auditing major Price Waterhouse has quit audit mandate of technology firm Vakrangee Ltd, flagging concerns to the corporate affairs ministry about the books of accounts, mainly related to its bullion and jewelry business, even as the company denied any irregularities,” PTI report suggested.
    3. The board of directors of Vakrangee at their meeting held Saturday, May 5, 2018 has appointed M/s. A. P. Sanzgiri & Co, as statutory auditors of the company for the financial year 2017 – 2018 until the conclusion of ensuing Annual General Meeting to fill in the casual vacancy caused due to the resignation of Mi s. Price Waterhouse & Co Chartered Accountants LLP, the company said in a regulatory filing.

Although the fundamentals of the company seem prominent, the organization currently is in a middle of a dire situation. Till the time the highest management of Vakrangee Ltd. comes out and proves the allegations by both SEBI & PwC, the prices of the shares will continue to descend.