Sebi bars Poonawalla Fincorp MD

Mumbai: Within six months of its entry into the financial services space through the acquisition of

Magma

Fincorp, the

Poonawalla

Group, more famous for its vaccine-manufacturing capability, faced a setback. On Wednesday evening, markets regulator

Sebi

barred

Poonawalla Fincorp

’s MD

Abhay Bhutada

and seven other entities connected with him from the market for

insider trading

in

Magma Fincorp

stock leading to its acquisition.

Initial Sebi investigation showed that the eight entities together had profited by about Rs 13.5 crore through such trades using illegal means. Sebi has also ordered impounding of the bank accounts of these eight entities.

In its 46-page interim order, Sebi noted that in February 2021, its surveillance system generated insider trading alerts related to Magma Fincorp’s shares. This was around when Rising Sun Holding (RSHPL), an arm of the Poonawalla Group, announced it will acquire Magma Fincorp.

Following up on those alerts, Sebi conducted a preliminary examination into the Magma Fincorp stock to check if there was indeed any insider trading activity.

The order noted that Bhutada, who had access to the unpublished price-sensitive information (UPSI), seemingly engaged in fraudulent activities by sharing such information with several other people known to him who, in turn, bought shares of Magma Fincorp before the news was made public.

“Based on the discussions and factual findings on the connections, phone calls and funds transfers among various entities as well as transmission of UPSI from (Bhutada) to other entities... it can now be prima facie held that the (eight) entities, by pursuing a modus operandi, have carried out insider trading activities in the scrip of Magma,” noted the Sebi order, by its whole-time member S K Mohanty.

Prior to the acquisition, Bhutada was the MD & CEO of Poonawalla Finance, a subsidiary of RSHPL and after the acquisition has taken over as the MD of Poonawalla Fincorp. Along with Bhutada, Saumil Shah, Surabhi Kishore Shah, Amit Agrawal, Murlidhar Bagranglal Agrawal, Rakesh Rajendra Bhojgadhiya, Rakesh Rajendra Bhojgadhiya (HUF) and Abhijit Pawar have been named in the Sebi investigation report.

To protect the interest of investors and ensure market integrity, the regulator decided to take immediate action, Sebi said. The regulator has also asked the eight entities to file their replies with it within 21 days.

The report mentioned that Bhojgadhiya, Pawar and Saumil Shah are having continuous and an on-going strong relationship with Bhutada even after the event of insider trading. Sebi investigations also raised suspicion that Bhutada, being the main provider of insider information, probably had also been compensated monetarily by the other seven who profited from prior information about Poonawalla Group’s bid to acquire Magma Fincorp.

Since the start of the pandemic, the Pune-headquartered Poonawalla Group has made headlines for its vaccine-manufacturing capabilities. Currently, Serum Institute, controlled by the group, is the largest vaccine manufacturer in the world by volume and has supplied millions of Covid vaccine doses globally. Its partnered AstraZeneca which holds the licence of the vaccine developed by Oxford University. Since the launch of the Covishield vaccine, the group has emerged as one of the mainstays of India’s fight against the Chinese-origin virus.


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