Promoters of Electrosteel Castings pay Rs 1.36 cr plus notional profits to settle insider-trading allegations

The market regulator had conducted an investigation into the trading by promoters and promoter group entities in the scrip of ECL before the public announcement of a proposed amalgamation.

Promoters of Electrosteel Castings Limited (ECL) have settled allegations of insider trading by paying Rs 1.36 crore and by disgorging notional profits along with an annual interest charged from the date of default.

ECL's stock, which closed four percent higher on July 15, has been seen more than 242 percent appreciation over the past one year and more than 1,260 percent over the past five years. The market regulator's investigation covered promoter entities' trades between May 17, 2020, and January 6, 2021.

A settlement order issued by the Securities and Exchange Board of India (Sebi) on July 12 said that Amit Kumar Rathi, Anjushree Rathi and Saroj Rathi have paid Rs 45.5 lakh each, and have disgorged notional profits of over Rs 6.54 lakh, Rs 2.91 lakh and Rs 2.9 lakh, respectively. The three have also paid 12 percent interest per annum on the notional profits, calculated from the date of default to the date of settlement application.

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The market regulator had conducted an investigation into the trading by promoters and promoter group entities in the scrip of ECL before the public announcement of a proposed amalgamation. Srikalahasthi Pipes Limited was to be amalgamated with ECL.

After the market regulator investigated the promoter's trades, it was alleged that the three had traded in the scrip when they were in possession of unpublished price sensitive information (UPSI) about the amalgamation. The trades had allegedly led to notional profits of more than Rs 12.36 lakhs in total.

A showcause notice dated December 7, 2023, was issued to the three of them. The three asked for inspection of the documents which were then conducted on January 4, 2024.

Then, they filed a settlement application on February 6, 2024.

Sebi's Internal Committee recommended the settlement terms after meeting with the three noticees on March 13, 2024. After Sebi's High Powered Advisory Committee (HPAC) considered the settlement terms and Sebi's panel of Whole-time Members approved the terms on June 10, 2024, the noticees were informed about it through an email on June 12, 2024.

The noticees informed the regulator that the settlement amount had been remitted.