Sebi charges Murugappa Group chief, 3 others with insider trading

The regulator to impound gains worth Rs 2.15 cr, including interest of 12% a year since 2011, from the entities involved

The Securities and Exchange Board of India (Sebi) on Thursday charged A Vellayan, chairman of the Murugappa Group, and three others with insider trading.

In an eight-page order, the regulator alleged Vellayan had passed price-sensitive information pertaining to the acquisition of Sabero Organic Gujarat by Coromandel International, a Murugappa Group entity. It directed V Karuppiah, A R Murugappan and other entities to surrender unlawful gains made by trading in Sabero shares. The order said the regulator would impound gains worth Rs 2.15 crore, including interest of 12 per cent a year since 2011, from these entities.

Karuppiah is the son-in-law of Murugappan. Vellayan's grandfather and Murugappan's mother are siblings.

"The funding to Gopalkrishnan C, through layered transactions by a person connected with the chairman of Coromandel, prima facie appears that the trading by Gopalkrishnan C was based on the knowledge of UPSI (unpublished price-sensitive information). Further, the trading of V Karuppiah (HUF) also appears to be based on the knowledge of UPSI. As detailed, it appears the UPSI had passed on from A Vellayan and A R Murugappan," Sebi member Prashant Saran said in the order.

The alleged insider trading case dates back to 2011. The market regulator has passed the order based on analysis of events between May 15, 2011, and June 15, 2011, based on complaints. The Sabero stock had soared from Rs 58 on May 13, 2011, to Rs 130 on June 14, 2011.

Sebi has alleged Gopalkrishanan had purchased about 319,000 shares of Sabero for Rs 2.72 crore.

The Sebi order said Gopalkrishanan hadn't traded in any other security earlier. It added he had received Rs 1 crore from Subramaniam M, son of Murugappan. This amount was used to buy the shares on the same day. Subramaniam M had received the same amount from Murugappan on the same day.

"It is important to note that all these transactions had taken place on a single day, May 28, 2011," Sebi said in an order posted on its website on Thursday.

After 24 days, Gopalkrishanan had sold Sabero shares and made unlawful gains of Rs 1.3 crore, the Sebi order alleged. It added V Karuppian had traded in the shares of Sabero and made gains of about Rs 16 lakh.

Sebi has given the four entities charged in the order three weeks to reply or appear before the regulator. It has said it might initiate further action against the entities after completion of investigation, adding it will issue show-cause notices to them.

Vellayan was appointed chairman of the Murugappa corporate board in August 2009, succeeding M A Alagappan. He is also on the board of Kanoria Chemicals.