Insider Trading in Electrosteel Casting by Promoter Group Entities before Merger with Srikalahasthi Pipes?
Moneylife Digital Team 06 October 2020
Are the promoter group entities of Electrosteel Castings Ltd, which on Monday announced an amalgamation scheme with Srikalahasthi Pipes Ltd, involved in insider trading? The allegation has been making the rounds of social media with details of their trades.
According to the information shared by the investor, 10 promoter and promoter group entities, including Mayank Kejriwal, executive director and managing director (MD) of the company, bought 12.18 million shares in Electrosteel between 21st August and 29 September 2020, a week before the company announced the merger scheme with Srikalahasthi Pipes.  
The share buyback by the promoters and promoter group entities started on 21 August 2020 with Electrocast Sales India Ltd buying 14,50,000 shares, thus increasing its stake to 8.96% from 8.63% in of Electrosteel. Electrocast Sales carried out three more transactions, two in August and one in September, to increase its stake in Electrosteel to 9.13% from 8.63%. This data was collated from the BSE website. 
Asha Kejriwal, from the promoter group, also bought shares of Electrosteel from open market to increase her stake to 0.42% in two transactions carried out on 24th and 25 September 2020.
Mayank Kejriwal, who is MD of the company, too bought shares of Electrosteel from open market and in two consecutive transactions, he increased his stake to 0.48% from 0.25%.
GK Investments Ltd carried out four acquisition transactions to increase its stake to 5.55% from 5.04% during 28th August and 24 September 2020. 
GK & Sons Pvt Ltd is a promoter group entity of Electrosteel. In five transactions, it increased its stake in Electrosteel to 10.87% from 10.39% during 26th August and 21 September 2020.
In a similar manner, Murari Investment & Trading Company Ltd, another promoter group company, bought over 21.75 lakh shares to take its holding to 7.67% from 7.17% in Electrosteel. Murari Investment & Trading bought all the shares from open market during September 2020.
Sree Khemisati Constructions Pvt Ltd, one of the promoter group entities, increased its stake to 3.18% from 3.05% in two transactions on 4th and 7 September 2020. 
In a similar manner, Quinline Dealcomm Pvt Ltd, Malay Commercial Enterprises Ltd and Uttam Commercial Company Ltd, all three promoter group companies, increased their stake in Electrosteel. Post the acquisitions, Quinline Dealcomm's stake increased to 0.14% from 0.07%, while Malay Commercial Enterprises and Uttam Commercial's stock holding increased to 1.18% and 5.22% from 1.05% and 5.12%, respectively.
On 5 October 2020, board of directors of Electrosteel and Srikalahasti Pipes approved the proposed scheme of amalgamation of the two companies. After the merger, the combined entity will become a leading manufacturer of ductile iron (DI) pipes. The merged entity will have total DI pipe manufacturing capacity of 800,000 tonnes in India with a market share of 30%, the company said in a regulatory filing.
In a regulatory filing on 6 October 2020, Electrosteel has denied any insider trading in its shares. "...we understand that the significant movement in the price of the company's security across Exchanges might be due to the intimation dated 5 October 2020, made by the company, under Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ('Listing Regulations'), regarding approval by the board of directors of the company at its meeting held on 5 October 2020, of the proposed draft scheme of amalgamation amongst Srikalahasthi Pipes and the company and their respective shareholders and creditors, under the provisions of Sections 230 to 232 of the Companies Act, 2013, and related disclosures. Apart from the above, the movement in the price of shares of the company is purely due to external market conditions and is absolutely market driven beyond the control of the company," it says.
Moneylife sent an email to senior officials of Electrosteel Casting as well as market regulator, Securities and Exchange Board of India (SEBI). However, till writing this story, we have not received any reply from them. We will incorporate their response as and when we receive it. We have also sent an email to SEBI and the two national stock exchanges and have not heard from any of them. 
On Tuesday, Electrosteel ended 7% down at Rs21.50, while Srikalahasthi Pipes ended the day 14% down at Rs115 on the BSE. The benchmark Sensex closed 1.54% up at 39,574.
3 years ago
The promoters have a dubious record. Promoters did a QIP in Srikalahasthi Pipes @ 375 in December-2017 to raise 250 Crores at the peak of Small & Mid Cap Rally. They paid off all term loans with that & brought down the share price to 100 in next 2 years. During this time, they bought truckloads of shares of Srikalahasthi pipes also at lower price
3 years ago
Merger ratio is fraud on the shareholders of Srikalahasti as ratio does not take into account potential (may be read as sure) loss to Electrosteel Catings Ltd of over 1400 cr on account of cancellation of coal mines and attachment of properties worth Rs 285 cr by the lender of Electrosteel Steels Ltd. These two items alone will erode Electrosteel Casting net worth completely.
3 years ago
Unprofessional Approach.
3 years ago
You are living in a fool’s paradise, if you are expecting SEBI to act. SEBI acts like an automated system to the benefit of culprits. Cases like this needs forensic audit of all the transactions which is beyond SEBI’s interest.
Replied to umeshs62 comment 3 years ago
SEBI is always in Dormitory and wakes up when it is incapable of doing any remedial action. Better to abolish SEBI. It is a rehab Centre for certain bureaucrats
3 years ago
I feel a forensic audit be ordered by SEBI and/or SFO and the promoters be kept of the Company till its conclusion. I had invested in the Company on the basis of their past performance. I have lost 75% of my investment.
Replied to prasanna comment 3 years ago
Myself and my family are also affected investors by this unfair ratio of exchange of Sri Kalahasti pipe shares. I am interested in mobilizing all small shares holders into a group and complaining to Regulators about this fraud. Can you please share your email id and contact number.
K R L Raju FCA
Former President of Bangalore Stock Exchange
Rupesh Chatterjee
3 years ago
Good. Now their updated share certificate will be issued with the "Go to Jail" stamp.
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