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Prakash Steelage IPO – Indian IPO market in sorry state as Management convicted for tax evasion files for offering

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The Indian Market has seen a slew of junk Initial Public Offerings (IPOs) which have led to large losses for investors.The fundamentals of these companies are quite abysmal with characteristics like debt defaults (Nitesh Estates),losses (Tarapur Transformers) and opaque business model ( Jaypee Infrastructure).Most of these IPOs have bombed while some have been pumped and dumped like Aster Silicates currently and Texmo Pipes earlier.The stock market regulator SEBI has been strangely been absent from preventing such abuse of the capital markets.The  Indian IPO market has touched rock bottom with Prakash Steelage now  coming with an IPO.The management of this company has been convicted of hiding income from tax authorities and has already paid huge penalties.Why such offering with such criminal management is coming in the stock market is beyond me.Reviewing such a stock would be a waster of time since clearly this is an IPO which in my opinion should not be allowed to be traded at all. Since you can’t trust the management to issue correct financial statements,how can you base an analysis of the stock based on the DHRP filed by the company.The company still has unascertainable  liability with the tax authorities.Here is an excerpt from the DHRP filing with SEBI.

The income-tax authorities have carried out search and seizure operations in the premises of our Company and during this operation certain voluntary disclosures in relation to undisclosed income have been made by Mr. Prakash C. Kanugo on behalf of himself and his related individuals/group companies/concerns which includes the Company..
During February 2009, we amongst others was subjected to a search and seizure proceedings by the Income Tax Department under section 132 of the Income Tax Act, 1961. During the course of the search and seizure, the Income Tax Authorities have taken custody of certain documents/records and recorded statements of certain officials of the Company. Mr. Prakash C. Kanugo, Chairman & Managing Director on behalf of himself and his related individuals/group companies/concerns which includes the Company filed a voluntary declaration on February 25, 2009 (based on best judgement) declaring an aggregate sum of Rs.15,00,21,000/- as the undisclosed income and thereafter paid a consolidated income tax totaling to Rs. 4,87,14,831/-. Out of the above voluntary consolidated income declaration by Mr. Prakash C. Kanugo the declaration of income for the Company was Rs. 7,10,97,351/- and the total income tax paid on the said declaration was Rs. 2,70,96,896 (including interest thereon)/-.

We received a Notice dated July 6, 2009 under the provisions of section 153A of the Income Tax Act, 1961 wherein it was inter-alia directed to file a true and correct return of total income in respect to AY 2003 – 04, AY 2004 – 05, AY 2005 – 06, AY 2006 – 07, AY 2007 – 08 and AY 2008 – 09. In response to the Notice, the Company vide its letters dated August 14, 2009 filed the acknowledged copy of the returns filed for AY 2003- 04 to AY 2008-09. The Income Tax Authorities have examined the records / documents taken into their Particulars No. of cases/disputescustody and statements recorded during the course of the raid and have forwarded their findings to the Assessing Officer, for assessment on the basis of such findings.
The Assessing Officer issued a Notice dated August 28, 2009 under section 143(2) of the Income tax Act , 1961 requiring the Company through its authorized representative to be present on September 15, 2009. The Company vide its letter dated October 14, 2009 requested the proceedings under section 143(2) be dropped since the Notice under section 153A was already issued in the matter. On October 1, 2009 the Company received another Notice under section 142(1) and 143(2) of the Income Tax Act, 1961 wherein the Assessing Officer inter-alia required the Company to furnish the information specified in the prescribed format by
October 19, 2009. The Company vide letter dated October 20, 2009, sought an adjournment of the hearing and requested for a fresh date of hearing in the matter. The matter is still pending for hearing before the Assessing Officer.

The assessment proceedings for the respective assessment years have commenced, however the tax liability if any, which may arise on this account, is presently unascertainable.


Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to

3 Responses so far | Have Your Say!

  1. Young@Market

    Very true…. regulator should add a clause to the rules so that only trustworthy companies can trade their stocks… not a cheating one………I guess less than 10% people would read the entire DHRP before buying in IPO.. all these gives confidence to the management to launch their IPO….. they know people are lazy.. and just want to make some quick bucks in market… sad but true