Poonawalla Fincorp MD barred from stock markets for insider trading in Magma Fincorp; SEBI ruling explained

By: |
September 16, 2021 9:10 AM

Adar Poonawalla-owned Poonawalla Fincorp’s Managing Director Abhay Bhutada has been barred from the securities market by regulator SEBI (Securities and Exchange Board of India) for alleged insider trading.

SEBIThe market watchdog said its systems generated insider trading alerts related to the shares of Magma Fincorp in February this year.

Adar Poonawalla-owned Poonawalla Fincorp’s Managing Director Abhay Bhutada has been barred from the securities market by regulator SEBI (Securities and Exchange Board of India) for alleged insider trading. The capital markets regulator has also barred seven other people along with Abhay Bhatuda, while impounding an amount of Rs 13.58 crore for wrongful gains. The insider trading case dates back to February 2021, when the company was called Magma Fincorp, just when news of Adar Poonawalla picking up a controlling stake in the company 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 entering the securities market in its interim order. Earlier this year, Adar Poonawalla-owned Rising Sun Holdings acquired a 60% stake in the NBFC through an equity infusion of Rs 3,456 crore. In July, the company was renamed from Magma Fincorp to Poonawalla Fincorp.

SEBI system generates alert

The market watchdog said its systems generated insider trading alerts related to the shares of Magma Fincorp in February this year. This was around the time when the announcement was made regarding Adar Poonawalla’s Rising Sun Holding Pvt Ltd acquiring a controlling stake in the company. Upon investigating the alerts, SEBI said it found Abhay Bhutada had access to information 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 said in the order.

SEBI said that the eight people involved in the case made wrongful gains worth Rs 13.58 crore during the period under investigation. The funds have now been impounded by the market regulator. During the month of February this year, shares of Poonawalla Fincorp (then known as Magma Fincorp), rallied a massive 158%. The stock has risen 343% so far in 2021 to Rs 180.9 as of yesterday’s close.

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