Three investors sold significant stakes in Edelweiss Financial Services Ltd, IIFL Finance Ltd and Paytm weeks before the Reserve Bank of India's (RBI) regulatory action slammed their stocks, Mint has reported.
From December to May, the central bank took regulatory action and imposed business curbs against the three companies over inadequate KYC checks and governance issues among others.
Ahead of the crack down, Mohnish Pabrai, Prem Watsa and Softbank sold major shares in Edelweiss, IIFL and Paytm respectively, the report citing exchange data said.
Moneycontrol couldn't independently verify the report.
The report said though there was no clear link between the two, a proxy adviser called the sale “odd” and another said the market regulator should find out the reason behind these investors selling the shares.
Edelweiss Financial Services
Pabrai, a seasoned India-born American investor, sold 3.83 percent of his stake in Edelweiss between February 8 and April 3. Edelweiss Financial Services stock price tanked 16 percent in trade on May 30 after RBI imposed restrictions on two of its financial services entities, citing material supervisory concerns. Pabrai owned a 7.08 percent stake in the company.
“We were not aware of the RBI action until we read it in the media and we have no further comment,” a spokesperson for Pabari was quoted as saying.
IIFL
FIH Mauritius, a wholly owned subsidiary of Fairfax India Holdings owned by Watsa, sold 5.66 percent shares in December. Shares of IIFL Finance tanked 20 percent on March 5 to hit the lower circuit, a day after RBI asked the company to stop sanctioning or disbursing gold loans with immediate effect on certain material supervisory concerns.
Watsa, who owns 15.12 percent in the company, didn’t respond to an email seeking his response, the report said.
Paytm
Between December 19 and January 20, Softbank, the third largest investor in One97 Communication, Paytm's parent company, Softbank sold 2 percent of its holdings in the payments firm. It sold another 2.7 percent between January 23 and February 26. On January 31, the RBI imposed crippling business restrictions on Paytm Payments Bank, including accepting fresh deposits and doing credit transactions after February 29.
Softbank declined to comment but an executive who knew of the decision said the stake sale was not linked to regulatory action, the report said.
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