In a major insider trading case, markets regulator Sebi has ordered impounding unlawful gains totalling over Rs 1.6 crore made by seven entities linked to the erstwhile Bank of Rajasthan promoter family ahead of the lender’s merger with ICICI Bank.
Sebi also asked all banks and depositories to ensure that no debits are made from the bank and demat accounts of these seven persons/entities, who in turn have been directed not to dispose off or alienate any of their assets, properties or securities till they credit the amount in an escrow account.
They have also been asked to provide, within 7 days, to Sebi a full inventory of all their assets and properties and details of all their bank accounts, demat accounts and holdings of securities and details of companies in which they hold substantial or controlling interest. The entities facing Sebi action include Rohit Premkumar Gupta, Sanjay Kumar Tayal, Navin Kumar Tayal, Jyotika Sanjay Tayal, Advik Textiles and Realpro Pvt Ltd, Kulwinder Kumar Nayyar and Azam Mohmmed Ashan Shaikh.
The Securities and Exchange Board of India (Sebi) had investigated into possible insider trading in the scrip of Bank of Rajasthan Limited (BoR) prior to announcement of agreement executed on May 18, 2010, between the dominant shareholders of BoR with ICICI Bank Limited for agreeing to merge the two banks. The Tayal family-run BoR had informed the National Stock Exchange on May 18, 2010, after market hours at 5.12 pm that it received a communication from Sanjay Tayal, a Director of BoR and related to the dominant shareholding group, requesting BoR to convene a board meeting urgently that day. The stock exchange intimation also mentioned that the dominant shareholders of BoR had entered into an agreement the same day with ICICI for proposing an amalgamation of both the banks and ICICI was convening its own Board of Directors meeting that day for considering the proposed amalgamation and for approving several actions necessary for the process. As per the submissions of ICICI, the agreement was signed at 4.30 am in the early morning on May 18, 2010. The agreement mentioned that subject to valuations, 25 shares of ICICI will be allotted for every 118 shares of BoR, that is a shareholder holding 4.72 shares of BoR would be entitled to receive one share of ICICI.
In its investigations, Sebi observed that the announcement with regard to the agreement was made by BoR to the stock exchanges between 17:12 hours and 17:25 hours on May 18, 2010, after receiving intimation of the same from one of its directors, Sanjay Tayal, as BoR was not a signatory to the agreement.
ICICI disseminated the aforesaid information to the stock exchanges between 20:10 hours and 20:18 hours on May 18, 2010. The share price of BoR was Rs 55 at BSE and Rs 54 at NSE on April 1, 2010 and increased to Rs 99.50 at BSE and Rs 99.45 at NSE on May 18, 2010. Although, the merger announcement was made after market hours on May 18, 2010, it was observed that on the day of the announcement, the share price of BoR increased by 20 per cent on BSE and NSE with huge trading volumes.
Further, the price of the scrip of BoR increased even on the next trading day, May 19, 2010, by 20 per cent and by another 10 per cent each on the next three trading days.
On account of huge trading volumes in the scrip of BoR and the delayed announcement of the merger, “insider trading” in the scrip of BoR was suspected. The investigations observed that BoR was a listed private sector bank incorporated in the year 1943. The Tayals (the promoter group of BoR before merger) had replaced the ‘Bangurs’ as the promoters of BoR around the year 1998. The Tayals had entered into an agreement with ICICI for agreeing to merge BoR with ICICI which was completed on August 12, 2010.
Prior to the merger, the scrip of BoR was listed at BSE, NSE and Jaipur Stock Exchange. Investigations revealed that Pravin Kumar Tayal and Sanjay Tayal, on behalf of the dominant shareholders of BoR, were negotiating with ICICI right from March 2010. The dominant shareholders of BoR were Pravin Kumar Tayal,Sanjay Kumar Tayal, 21st Century Entertainment, Cyber Infosystems and Technologies Pvt Ltd, EDC Securities Pvt Ltd, Cyber Info Zeeboomba.com, Cumballa Hill Property Developers, Sumandar Property Developers, Ahmendnagar Investments and Giriganga Investments.
Thereafter, the Binding Implementation Agreement with ICICI was executed at 4:30 am on May 18, 2010. Investigations also revealed that there were series of meetings on May 17, 2010 which finally culminated into the execution of agreement at 04:30 hours on May 18, 2010. Passing the order, Sebi’s Whole Time Member Prashant Saran said the agreement between ICICI and BoR’s controlling shareholders was a ‘unpublished price sensitive information’ in terms of Sebi’s Prohibition of Insider Trading Regulations.
This information was in existence on May 17, 2010 and was eventually made public at 17:25 hours on May 18, 2010, Sebi said while adding that it also analysed the trading pattern and the trading concentration of entities in the scrip of BoR and finally identified certain entities for further analysis.
The investigation further analysed the trading pattern, perused the KYC documents and bank account statements of the suspected entities. The probe finally found that Rohit had received an amount of Rs 1.16 crore from Advik which has been used to purchase shares of BoR during the existence of UPSI.