Price manipulation and big industrial houses
February 15, 2002
Price manipulation and insider trading - that was the first reaction of many market watchers when Reliance suddenly announced its decision to sell its 10.05 per cent stake in Larsen & Toubro on November 18, 2001.
Until a few weeks leading to the sale by Reliance, the L&T scrip price was languishing so badly on the bourses that an investor called Ravindra Mehta complained to the Securities and Exchange Board of India. His letter (dated October 22, 2001), said shareholder value had eroded because L&T's management was 'dilly-dallying' over the demerger of its cement division.
Within a matter of days, the share price was electrified. The stock rose from under Rs 150 and was at Rs 208.50 when Reliance announced it sale on November 18. Yet, Grasim paid Reliance a hefty Rs 306 for its 10.05 per cent stake or 2.5 crore shares. Was there insider trading? Who knew about the deal? Who profited from the information and who was buying the shares before the sale?
The answer is -- Reliance Industries. As this column will show, the SEBI investigation (documents relating to which is available with this columnist) so far seems to establish a clear case of insider trading based on information collated from the bourses, from Reliance and Grasim.
This investigation followed a complaint by Kirit Somaiya, a member of Parliament who wrote to SEBI on January 7, 2002 alleging that Reliance had first increased its holding in L&T from 6.62 per cent to 10.05 per cent and then sold the shares to Grasim at Rs 306 and accused the group of fraudulent practices and insider trading.
SEBI's investigators confirm all that and worse. They now need to wrap it up with specific questions and corroborating information such as telephone records to prove their case. Although Reliance Industries claims it has done no wrong, let us examine the facts.
The stock exchanges:
In response to SEBI's queries the National Stock Exchange... [continues]
February 15, 2002
Price manipulation and insider trading - that was the first reaction of many market watchers when Reliance suddenly announced its decision to sell its 10.05 per cent stake in Larsen & Toubro on November 18, 2001.
Until a few weeks leading to the sale by Reliance, the L&T scrip price was languishing so badly on the bourses that an investor called Ravindra Mehta complained to the Securities and Exchange Board of India. His letter (dated October 22, 2001), said shareholder value had eroded because L&T's management was 'dilly-dallying' over the demerger of its cement division.
Within a matter of days, the share price was electrified. The stock rose from under Rs 150 and was at Rs 208.50 when Reliance announced it sale on November 18. Yet, Grasim paid Reliance a hefty Rs 306 for its 10.05 per cent stake or 2.5 crore shares. Was there insider trading? Who knew about the deal? Who profited from the information and who was buying the shares before the sale?
The answer is -- Reliance Industries. As this column will show, the SEBI investigation (documents relating to which is available with this columnist) so far seems to establish a clear case of insider trading based on information collated from the bourses, from Reliance and Grasim.
This investigation followed a complaint by Kirit Somaiya, a member of Parliament who wrote to SEBI on January 7, 2002 alleging that Reliance had first increased its holding in L&T from 6.62 per cent to 10.05 per cent and then sold the shares to Grasim at Rs 306 and accused the group of fraudulent practices and insider trading.
SEBI's investigators confirm all that and worse. They now need to wrap it up with specific questions and corroborating information such as telephone records to prove their case. Although Reliance Industries claims it has done no wrong, let us examine the facts.
The stock exchanges:
In response to SEBI's queries the National Stock Exchange... [continues]
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