Electrosteel Castings Resolves Insider Trading Case with Sebi

A recent case of insider trading involving 15 entities connected to Electrosteel Castings was settled on Thursday with Sebi after the payment of a total settlement amount of Rs 18 crore. Additionally, a Sebi committee mandated that the entities also disgorge unlawful gains along with interest, resulting in a total sum of Rs 11.68 crore.

Among the entities involved in the case were Electrosteel Castings Managing Directors Umang Kejriwal and Mayank Kejriwal, who have agreed to voluntarily abstain from participating in the securities markets for a period of six months as part of the settlement. The settlement order was a result of 15 separate settlement applications submitted on April 26, 2024, with the applicants expressing a desire to conclude the ongoing proceedings without admitting or denying the facts or conclusions of law presented.

Sebi’s Chief General Manager Santosh Shukla formally ordered the closure of the proceedings based on the settlement regulations following the submission of the settlement applications. The investigation conducted by the Securities and Exchange Board of India (Sebi) focused on trading activities related to the scrip of Electrosteel Castings Ltd (ECL) between May 17, 2020, and January 06, 2021, to determine if certain entities engaged in trading while in possession of undisclosed price sensitive information (UPSI) in regards to the amalgamation of Srikalahasthi Pipes with ECL, thereby breaching the provisions of the Prohibition of Insider Trading (PIT) regulations.

A Show Cause Notice (SCN) was issued to the entities on February 26, 2024, for their alleged violations of insider trading norms. The regulator identified the announcement of the proposed amalgamation scheme between SPL and ECL on October 05, 2020, as UPSI within the ambit of the PIT regulations, with the UPSI period being identified as August 18, 2020, to October 5, 2020. The notice named several connected entities, including Electrocast Sales India, G K & Sons Pvt Ltd, who purportedly traded in ECL shares during the UPSI period.

Allegedly, insiders like Madhav, Umang, and Mayank Kejriwal communicated UPSI to their connected entities, further contributing to the trading in ECL shares while in possession of UPSI. Notable individuals mentioned in the notice included Priya Manjari Todi, Ashutosh Agarwal, and Gouri Shankar Rathi, who were accused of trading in ECL shares while having access to UPSI. With the exception of Umang and Mayank Kejriwal, the applicants reportedly generated a notional profit of Rs 8.18 crore from these trades, the Sebi order stated.

Subsequently, the entities presented revised settlement terms on August 23, 2024, which were approved by Sebi’s high-powered advisory committee. Following the payment of the settlement fee and the disgorgement amounts by the 15 entities individually, the case was officially resolved with Sebi, closing the chapter on the insider trading case.