Sebi suspects bear cartel role in Crompton Greaves share fall

The Securities and Exchange Board of India (Sebi) will probe whether a bear cartel triggered the sharp fall in the share price of electrical appliance maker Crompton Greaves by spreading rumours about the company.

The shares of the Gautam Thapar-led Avantha Group company had tanked 14 per cent in each of the past two trading sessions amid rumours of insider trading, but recovered some of the lost ground on Thursday.

The stock closed 2.5 per cent up at Rs 181.30 on the Bombay Stock Exchange (BSE), after reaching a 52-week low of Rs 171 yesterday.

The sharp fall on July 19-20 had come under the Sebi scanner, as it coincided with widespread rumours of alleged violation of insider trading rules by the company’s former chief, Sudhir Trehan, sources said.

As neither the company, nor Trehan, prime-facie appeared to have violated insider trading norms, the regulator suspected the role of some bear cartel in spreading rumours to hit the share price, they added.

The rumours about Trehan having sold a significant amount of shares in the market in violation of rules began soon after the company posted a sharp fall of 58 per cent in quarterly net profit on July 19, giving rise to the suspicion of some ulterior motives by a bear cartel, sources added.

Trehan had apparently sought prior permission for sale of his shares and the insider trading norms might not have been violated by him, sources added.

In a statement issued on Thursday, Crompton Greaves also clarified that Trehan demitted office on June 1 and the shares in question were bought by him 11 years ago.

“...He sold them to plan for his retirement. Due process was followed in line with Sebi and Crompton Greaves’ insider trading regulations, pursuant to which Trehan sought permission to sell his shares in the open trading window, which the company secretary gave,” the company said in a statement.

“These shares were sold towards the end of June 2011 and on July 1, 2011, and the stock exchanges were duly informed according to the regulatory requirements,” it added.

The company has not received any communication about any probe into insider trading rule violation from Sebi or the stock exchanges.

Sources said the probe was in its initial stage and would first focus on the entities having purchased and sold the shares in the past couple of days.

The bear cartels generally work on beating down the share price of a company to buy them at lower levels. At times, they also work at the behest of rivals.