The regulator has impounded the bank accounts of these individuals to the extent of Rs 13.58 crores.
Sebi said its surveillance alert system had detected suspicious trading pattern in the shares of Magma Fincorp around the announcement of Magma Fincorp’s acquisition by Rising Sun Holding Private Limited (RSHPL), a company controlled by Poonawalla Group, on February 10,2021.
The deal involved the company making a preferential allotment to Rising Sun to raise fresh capital of Rs 3,456 crores.
Following the deal announcement, shares of Magma had hit upper circuit for seven straight trading days.
On analysis of the alerts for the announcement, a group of connected entities were observed to have taken long position in the shares. Subsequently, these entities had squared off the long positions thereby generating substantial profits, said Sebi.
The regulator said Abhay Bhutada, working as MD and CEO of Poonawalla Finance, a subsidiary company of Rising Sun, was the contact person for the deal from the very beginning of the discussion and has been involved in the matter throughout the UPSI (unpublished price sensitive information) period.
Sebi’s probe, based on call data records and bank statement analysis revealed that Abhay Bhutada had passed on the inside information to his connected entities — Abhijit Pawar, Saumil Shah and Rakesh Bhojgadhiya, who in turn passed on this information to Amit Agrawal.
Sebi alleged that these entities took substantial position in the shares of Magma Fincorp starting from February 1, 2021 (before the announcement of the deal), using the trading accounts of their connected individuals.
The regulator also alleged that the financial support for the trades executed from the trading account of Rakesh Bhojgadhiya and his HUF(Hindu Undivided Family),was largely from the funds received from Abhijit Pawar and his relative. Following the liquidation of the buy positions, the wrongful gains earned out of the trades was shared by Rakesh Bhojgadhiya with Abhay Bhutada and Abhijit Pawar, said Sebi.
“The preventive directions are warranted, since Abhay Bhutada has now been elevated to the position of Managing Director of Magma Fincorp (now known as Poonawalla Fincorp Ltd) and has access to ongoing UPSIs of the company. Further, Rakesh Bhojgadhiya, Abhijit Pawar and Saumil Shah are having continuous and an on-going strong relationship with Abhay Bhutada even after the aforesaid event of insider trading. Therefore, to protect the interest of investors and ensure market integrity, SEBI felt that immediate action was warranted against such entities as in future they might continue to trade in similar fashion, on the basis of UPSI,” Sebi whole time member S K Mohanty said in his order on Wednesday.