Magma Fincorp Insider Trading Case: Poonawala Fincorp MD Abhay Bhutada resigned from the board on Thursday 16 September. His resignation came a day after he was banned from the securities market by markets regulator SEBI for being found guilty in the insider trading case. According to the information given by Poonawalla Fincorp, Bhutada resigned from the board which became effective from 16 September. Now the company’s CEO Vijay Deshwal will run the operations. The company issued a statement saying that in view of the interests of the company and its stakeholders, it has been decided to resign.
The shares of this company were at a price of Rs 60.02 in February, which increased to Rs 147 in May and then reached a height of Rs 190 on August 16. However, after the current action of SEBI, selling started in its shares and on Thursday it closed at Rs 171.90 with a fall of 4.98 per cent.
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Action taken on eight entities including Bhutada
Sebi on Wednesday barred Bhutada and seven other entities from the securities market for insider trading in Poonawalla Fincorp shares. Earlier the name of this company was Magma Fincorp. Apart from Bhutada, SEBI has banned Saumil Shah, Surbhi Kishore Shah, Amit Agarwal, Murlidhar Bagranglal Agarwal, Rakesh Rajendra Bhojgadhia, Rakesh Rajendra Bhojgadhia HUF and Abhijit Pawar.
Adar Poonawalla’s Rising’s Sun Holdings bought a majority stake in NBFC Magma Fincorp and then invested Rs 2456 crore in it. It was announced in February 2021. Magma Fincorp became a unit of Poonawalla Group in May with Risingh Sun Holdings holding 60 per cent stake. Thereafter Magma was re-branded as Poonawara Fincorp. In May, Poonawalla took over as the chairman of Magma Fincorp.
this is the whole matter
- According to SEBI, its system gave an insider trading alert regarding Magma Fincorp shares in February 2021. At the same time, the acquisition of controlling stake in Magma Corp by Rising Sun Holding Private Limited, a Poonawalla Group company, was announced. After getting the alert, SEBI started preliminary investigation.
- SEBI, in its investigation, found that Bhutada, MD and CEO of Poonawalla Finance, would have become the MD of the target company as per the acquisition deal. He had non-public price sensitive information related to the acquisition.
- SEBI found that insider Bhutada was linked to Sumail Shah, Rakesh Rajendra Bhojgadhia and Abhijit Pawar.
Based on the call details record (CDR) and bank statements, the regulator found that Bhojgadhia was in contact with Amit Agarwal. Apart from this, Sumail Shah had family and financial relations with Surbhi Kishore Shah and Amit Agarwal had family and financial relations with Murlidhar Bagranglal Agarwal. - SEBI found that all these people had a phone conversation with each other during the relieve period and after that there was a transfer of funds.
- SEBI in its investigation found that trading of shares took place through these phone calls before the corporate announcement was made.
As per the SEBI order, eight individuals have been barred from trading or trading in securities. - SEBI fined Bhutada Bhojgadhian, Rakesh Rajendra Bhojgadhia HUF and Abhijit Pawar jointly Rs 8.3 crore, Amit Agarwal, Murlidhar Bagrang Agarwal and Bhojgadhia jointly Rs 3.5 crore and Sumail Shah and Surbhi Kishore Shah jointly Rs 1.76 crore have put. This amount has to be deposited within 15 days from the date of issue of order by opening an escrow account.
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