Adar Poonawalla-owned Poonawalla Fincorp’s Managing Director Abhay Bhutada has been barred from the securities industry by regulator SEBI (Securities and Exchange Board of India) for alleged insider trading. The capital markets regulator has also barred seven other persons along with Abhay Bhatuda, when impounding an quantity of Rs 13.58 crore for wrongful gains. The insider trading case dates back to February 2021, when the firm was named Magma Fincorp, just when news of Adar Poonawalla selecting up a controlling stake in the firm was made public.
SEBI has barred Abhay Bhutada (MD), Saumil Shah, Surabhi Kishore Shah, Amit Agrawal, Murlidhar Bagranglal Agrawal, Rakesh Rajendra Bhojgadhiya, Rakesh Rajendra Bhojgadhiya HUF, and Abhijit Pawar from getting into the securities industry in its interim order. Earlier this year, Adar Poonawalla-owned Rising Sun Holdings acquired a 60% stake in the NBFC via an equity infusion of Rs 3,456 crore. In July, the firm was renamed from Magma Fincorp to Poonawalla Fincorp.
SEBI technique generates alert
The industry watchdog stated its systems generated insider trading alerts connected to the shares of Magma Fincorp in February this year. This was about the time when the announcement was made concerning Adar Poonawalla’s Rising Sun Holding Pvt Ltd acquiring a controlling stake in the firm. Upon investigating the alerts, SEBI stated it discovered Abhay Bhutada had access to data surrounding the acquisition deal. SEBI added that Abhay Bhutada was connected with Saumil Shah, Rakesh Rajendra Bhojgadhiya, Abhijit Pawar, and other entities involved in the case.
“It is noticed that there were phone calls amongst the Entities during the relevant period and the said phone calls were followed by transfer of funds. Further, it is also noticed that persons enjoying connection through phone calls, fund transfers, etc. have traded in the scrip of Magma in advance of the afore-mentioned event i.e. disclosure of the corporate announcement,” SEBI stated in the order.
SEBI stated that the eight persons involved in the case made wrongful gains worth Rs 13.58 crore for the duration of the period below investigation. The funds have now been impounded by the industry regulator. During the month of February this year, shares of Poonawalla Fincorp (then identified as Magma Fincorp), rallied a enormous 158%. The stock has risen 343% so far in 2021 to Rs 180.9 as of yesterday’s close.