Allegro Capital named in Pandora Papers: What was the Sebi order about?

Kunal Kashyap's Sebi order was also linked to Biocon. It was related to a 2018 announcement about Biocon's global collaboration with Sandoz

The Securities and Exchange Board of India (Sebi) had investigated Allegro Capital over insider trading. The markets regulator asked the company and its Director and major shareholder Kunal Ashok Kashyap to pay Rs 24,68,751 and also imposed additional penalties in an order passed on July 8.

Kunal Kashyap was subsequently named in the ‘Pandora Papers’ a global investigation of offshore entities. The Indian Express published a series of investigative reports based on the ‘Pandora Papers’ on Monday. Previous such investigations led to government probes for tax evasion. There can also be legitimate reasons, including business ones, for being associated with such offshore entities. Monday’s report noted that Kashyap is associated with the Deanstone Trust, an entity set up through another entity owned by John McCallum Marshall Shaw. John Shaw is the husband of Kiran Mazumdar-Shaw, executive chairperson of biopharmaceutical company Biocon.  

The Sebi order against Kunal Kashyap was also linked to Biocon. It was related to a 2018 announcement about Biocon’s global collaboration with Sandoz, an arm of the global pharmaceutical company firm based in Switzerland. The company's stock rose 5.6 per cent the day after the announcement. The Sebi order noted that Biocon was negotiating with another firm CIMAB and Sandoz concurrently. Kashyap had the overall responsibility of negotiating with CIMAB. The Sebi order noted that he may reasonably be expected to have knowledge of the Sandoz partnership and would come under the definition of being an insider.

“It is alleged that noticees have traded in the scrip of Biocon during unpublished price sensitive information period,” according to the Sebi order.

“Even if, the noticees were bullish with respect to Biocon’s scrip in the long term, the sudden spurt/jump in volume shown by them during UPSI period has not been justified by them. To put it differently, noticees may have been bullish about Biocon, but because of the UPSI (unpublished price sensitive information), their purchases in the scrip of Biocon was advanced as they wanted to buy it before the price starts to increase after the publication of the announcement. Thus, the trigger for buying irrespective of the long term bullish view was on the basis of UPSI. Therefore, it is held that the noticees have dealt in the scrip of Biocon on the basis of UPSI and hence have violated Section 15G(i) of Sebi Act.”

It went on to bar Kunal Ashok Kashyap and Allegro Capital from the market for one year. Apart from being asked to disgorge Rs 24,68,751, they were also penalised Rs 10 lakh each.

The Securities Appellate Tribunal, which hears appeals against Sebi, stayed the order in August where it is still said to be pending.

“Media stories reporting on Pandora Papers wrongly implicate my husband’s offshore trust, which is a bona-fide, legitimate trust and is managed by independent trustees. No Indian resident holds “the key” to the trust as alleged in these stories,” said a statement from Kiran Mazumdar-Shaw, executive chairperson of Biocon on social media platform Twitter.