Poonawalla Fincorp tumbles after MD Abhay Bhutada resigns

Poonawalla Fincorp hit a lower circuit of 5% at Rs 163.55 after the company's managing director, Abhay Bhutada, resigned on Thursday, a day after being barred from the securities markets by Sebi for alleged insider trading.

Shares of Poonawalla Fincorp have corrected 9.74% in two sessions from its close of Rs 181.20 on 15 September 2021.

Bhutada has resigned from the board with effect from 16 September 2021, Poonawalla Fincorp said in a statement. Consequently, Bhutada ceases to be a director and key managerial personnel of the company.

The Securities and Exchange Board of India (Sebi) on Wednesday passed an interim order banning Poonawalla Fincorp's MD and CEO Ajay Bhutada and seven others from the securities market after they were found guilty in an insider trading case.

Apart from Bhutada, the regultor has barred Saumil Shah, Surabhi Kishore Shah, Amit Agrawal, Murlidhar Bagranglal Agrawal, Rakesh Rajendra Bhojgadhiya, Rakesh Rajendra Bhojgadhiya HUF, and Abhijit Pawar.

"Abhay Bhutada has decided to step down as the managing director of the company in the broader interest of the company and its stakeholders," the company said in a statement on Thursday.

On 10 February 2021, Adar Poonawalla-controlled Rising Sun Holdings announced acquisition of a 60% stake in the non-banking financial company (NBFC) Magma Fincorp (MFL) by subscribing to a Rs 3,456-crore preferential issue. Adar Poonawalla is the CEO of Serum Institute of India.

Sebi said it found Abhay Bhutada had access to information surrounding the acquisition deal and he was connected with other entities involved in the case.

Shares of Poonawalla Fincorp (then known as Magma Fincorp) rallied over 177% in 15 trading sessions between 29 January 2021 to 19 February 2021.

Sebi said that the eight people involved in the case made wrongful gains worth Rs 13.58 crore during the period under investigation. The funds have now been impounded by the market regulator.

Following the Sebi order, the company on 15 September 2021 notified to the bourses that it received a letter from Abhay Bhutada who denied all allegations mentioned against him in the Sebi order. "My transactions with the entities mentioned in the order are genuine business transaction and legitimate in nature including few of the past transaction," Bhutada said in his letter to the company.

In a separate announcement, Poonawalla Fincorp said that Sharad Pareek will replace Girish Poddar as the company's chief risk officer from 16 September 2021.

On a consolidated basis, Poonawalla Fincorp's net profit surged 71.15% to Rs 64.54 crore on 14.88% decline in total income to Rs 487.65 crore in Q1 June 2021 over Q1 June 2020.

Poonawalla Fincorp is a Poonawalla group non-banking finance company that focuses on consumer and MSME financing. It offers a diversified product suite to address the growing financing needs of the retail financing and the enterprises.

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