GMM Pfaudler’s 17.6% stake sale at a heavy discount to market price has attracted regulatory scrutiny over allegations of insider trading involving short selling of the company’s shares, said two people with direct knowledge of the matter.
“Positions were taken in the stock lending and borrowing mechanism, or SLBM, segment around the time of the announcement. The regulator has sought data from exchanges to ascertain any irregular patterns,” said one of the people cited above.
Securities lending and borrowing data sourced from NSE showed there was heightened activity in the segment with 87,283 shares being borrowed from 11 August till 25 September.
On 20 August, GMM Pfaudler acquired a majority stake in the global business of Pfaudler group. Subsequently, the company announced an offer for sale (OFS) by the promoters at a floor price of ₹3,500 per share on 22 September. The floor price was at a 33% discount from the previous closing of ₹5,241 on BSE. This led the stock to plunge by the maximum daily limit of 10% to ₹4,717.
The stock has fallen 36% in September, after rising astronomically by 93.07% in this year so far. On Tuesday, it was locked in a 5% upper circuit at ₹3,821.
“The SLB data naturally hints that there could have been few who were privy to information and rigged the share prices thereafter,” said an analyst who did not want to be named.
In an investor call on Friday, GMM Pfaudler managing director Tarak Patel said the SLB positions have dragged the company’s name in a very negative light. “We are willing to help any agency that would like to check or need information. We, as a company, are very conservative when it comes to governance,” said Patel.
“It seems low float and low trading volumes of the stock led to a disproportionate rise in its stock price, especially in reaction to big positive announcements. The management could have come out with a caution statement when the stock prices went through the roof with abnormally high valuations so as to nudge fresh investors into thinking about investing at high prices,” said Deepak Jasani, head of retail research, HDFC Securities.
