Poonawalla Fincorp shares fell 5 per cent on Thursday after the market regulator banned the managing director of the non-banking finance company and seven others from the securities market for insider trading. Managing Director Abhay Bhutada was found guilty of sharing information about Adar Poonawalla-owned Rising Sun Holdings’ proposed stake buy in the company before it was public knowledge, the Securities and Exchange Board of India (SEBI) said in an interim order on Wednesday.
Rising Sun Holdings had acquired a majority stake in Poonawalla Fincorp, formerly called Magma Fincorp, earlier this year. At the time Bhutada was the chief executive officer of Poonawalla Finance, a private subsidiary of Rising Sun Holdings. Based on call records, financial dealings and bank statements, SEBI discovered that several entities related to Mr Bhutada traded in Magma stocks before details of Rising Sun’s acquisition were disclosed to the stock exchanges. Mr Bhutada and seven other people are restrained from buying, selling or dealing in securities until further orders, SEBI said in its order. Poonawalla Fincorp and Abhay Bhutada did not immediately respond to Reuters request for a comment.
In March, Magma Fincorp said it had received shareholder approval for Rising Sun Holdings’ acquisition of a majority stake in the company via preferential issue of up to Rs 34.56 billion ($470.62 million). SEBI’s order also directs bank accounts of all entities involved to be seized to the extent of their liability in the insider trading case of Rs 135.8 million. Shares of Poonawalla Fincorp were locked in lower circuit on Thursday and were trading at Rs 171.90 a piece.
For the year, however, stock gained 351.12 per cent.