Something smells fishy in Aban Offshore...

The share price of Aban Offshore has risen sharply of late. What is the reason for such a big swing? As it seems at first sight, the trading pattern of the company`s shares throws up a lot of questions.

The shares of Aban Offshore have gone up more than 350% to around Rs 1,046 in just 3 months, raising doubts and pointing to potential price manipulation by a cartel of stock brokers through circular trading. To expand the analysis a bit, look at the table (at the end of the story) of bulk deals in company`s shares over the last 3 months; looks terribly like a circular trading.

Circular trades in a particular scrip happen when a closely knit set of market entities, mainly brokers, buy and sell shares frequently among themselves to push up the stock price. Since there are no genuine intentions to trade in the case of circular trades, the trading volumes thus generated are referred to as artificial volumes.

The company has a huge debt on its books with lower than expected cash flows from its operations. According to Sharekhan`s report, the highly leveraged position of the company remains one of the biggest concerns with its USD 3.2-billion debt.

Aban Offshore has not signed any new contract in the last seven months, raising serious concerns over its future and its ability to service its high debt.

Was it value buying or circular trading, or perhaps something else which pushed up the prices?

Shares of the company closed down Rs 41.75, or 3.98%, at Rs 1,008.15. The total volume of shares traded at the BSE was 1,133,540 (Friday).

via myiris