Insider trading in Ranbaxy?

Over six trading days, prior to the announcement of its acquisition by Sun Pharma on Monday, Ranbaxy shares rallied 34%. Could it be a case of insider trading?

On 7th April, Ranbaxy Laboratories Ltd (Ranbaxy) announced about its acquisition by Sun Pharmaceutical Industries Ltd (Sun Pharma) in $4 billion deal. Because of this announcement, Ranbaxy share price opened 10% up and made its 52-week high at Rs505 on BSE before it ended lower. But why was there a sudden rise in volumes and prices over six trading days, prior to this takeover?
 

The sudden unusual rise in Ranbaxy’s turnover and prices during last six trading days seems fishy. The stock rose by as much as Rs116 (34%) in days before its made public announcement, a huge rise of 8.18% happening on Friday, the trading day before the actual announcement! This was extremely unusual and points to a clear case of insider trading. Take a look at the following data:
 

Date

Open

High

Low

Close

No of Shares

27 Mar

356.3

359.15

344

346.75

2,40,842

28 Mar

348

369.15

348

364.05

8,19,101

31 Mar

364.05

373.75

359.2

365.05

4,87,117

01 Apr

369

373.2

364.8

370.7

3,37,894

02 Apr

371

414.4

371

404.1

23,13,647

03 Apr

407

429.45

403.1

424.8

15,84,663

04 Apr

428

462.7

427

459.55

22,80,999

 

On 28th March, Ranbaxy opened at Rs348 and closed 4.61% up at Rs364.05 with turnover of as high as 8.19 lakh shares. On 2nd April, Monday, it opened at Rs371 and closed 8.92% up at Rs400.39 with turnover of 23.13 lakh shares. On 3rd April it opened at Rs407 and closed 4.37% up to Rs424.8 and generated turnover of 15.84 lakh shares.

On 4th April, Ranbaxy opened at Rs428, made a day high at Rs462 and closed 7.37% up at Rs459.55 with as high as turnover of 22.80 lakh shares.

    

On 7th April, Ranbaxy opened 10% up and made 52-week high at Rs505 on announcement of its acquisition by Sun Pharma for $4 billion, after making its high it fell down to day low of Rs434.05 and closed 3.12% down at Rs445.20.
 

If someone knew about its acquisition plans and bought shares on 27th March at an average price of Rs350.8, he could have made 26.15% profit (Rs91.75 per share) on 7th April while selling at the average price of Rs442.55 today.
 

The dramatic nature of the rise and suspicions of insider trading comes through if you look at the following chart that plots Sensex and four other pharmaceutical stocks, Sun Pharma, Dr Reddy’s Laboratories, Ranbaxy and Cipla. It is not that the overall market was rallying. It was not that pharma companies were rallying. It was only Ranbaxy that was shooting up – based on no news that could be related to the company.

In fact, Ranbaxy has been struggling to find its feet ever since the Japan’s fourth largest pharma company, Daiichi Sankyo Co Ltd, took it over from streetsmart brothers Malvinder Singh and Shivinder Singh. It has lost billions trying to fix various problems that the earlier management seem to have left behind. During the December 2013 quarter itself, Ranbaxy lost Rs396 crore. The company is also facing legal issues from US FDA, which has banned its Toansa plant in Punjab. At one stage, the Daiichi management even thought of suing the Singh brothers for dumping a lemon on them.

 

In its regulatory filing Ranbaxy said, “Sun Pharma and Ranbaxy entered into definitive agreements pursuant to which Sun Pharma will acquire 100% of Ranbaxy in an all-stock transaction. Under these agreements, Ranbaxy shareholders will receive 0.8 share of Sun Pharma for each share of Ranbaxy. This exchange ratio represents an implied value of Rs457 for each Ranbaxy share, a premium of 18% to Ranbaxy’s 30-day volume-weighted average share price, as of the close of business on 4 April 2014.”
 

The suspicious spurt in volumes and price in Ranbaxy calls for an investigation by the market regulator. But then while insider trading is rife in India and SEBI rarely acts, despite having spent Rs40 odd crore in sophisticated inter-market surveillance system. Moneylife had written about suspicious trading activities in the AstraZeneca Pharma, LIC Housing Finance and Bajaj Corporation  to name a few. There have been no action by SEBI.
 

You may like to read more about Ranbaxy…

 

Ranbaxy plunges 20% as US FDA bans imports from its Toansa plant
 

Ranbaxy suspends production of all API’s from Toansa, Dewas plant
 

Ranbaxy Q4 loss narrows to Rs396 crore
 

Ranbaxy pleads guilty to felony charges; to pay $500 million in US lawsuit settlement

 

Ranbaxy to pay further $420,000 in US for selling sub-standard medicines

 

Making a smart choice: Thin line between compliance and collusion

 

EU regulator fines Ranbaxy, 8 others over Citalopram generic delay

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COMMENTS

Jose Koshy

5 years ago

Uff..Crazy n blatant Insider Trading. If this had happened in the US, we would have people in Jail. With just 2 % of savings getting to equity, the public voice is low to create an impact. Am sure Moneylife will file a complaint like always, now that there is an Ordinance passed 2 weeks back, guess they must use those provisions in the investigation.

Suiketu Shah

5 years ago

The knowledge most "wealth management companies" get is via insider trading and not "research department" etc and such nonsense.And on top it they deliberately give wrong tips so that they can earn illegal cash commission.(is they make more money than the victim investor who has trusted them in good faith)

sanjeev naik

5 years ago

It is a case of insider.. and half the profit is donated to election funds so no action will be taken against insiders....

Bosco Menezes

5 years ago

It certainly looks like there was insider trading on 2nd , 3rd & 4th

CVC Kumar seeks SC nod to withdraw from coalgate scam monitoring

CVC Pradeep Kumar requested the Supreme Court to allow him to withdraw from the coal scam cases as he had worked with the coal ministry as a joint secretary during 2003-06

Pradeep Kumar, the chief of Central Vigilance Commission (CVC) has requested the Supreme Court to allow him to withdraw from coal scam case monitoring. Kumar along with two other vigilance commissioners was asked by the apex court to help in monitoring coal blocks allocation scam probe.

 

The Chief Vigilance Commissioner submitted before a Bench headed by Justice RM Lodha that he be allowed to withdraw from the cases as he had worked with the coal ministry as a joint secretary between 2003-06.

 

The apex court said that it would consider the plea made by CVC when the special bench, which is hearing coalgate cases, assembles.

 

The court had on 28th March sought assistance of CVC to examine all cases in coal blocks allocation scam in which there were divergent views between the investigating officer and Central Bureau of Investigation (CBI)’s head office on filing charge sheets.

 

It had asked CVC and two vigilance commissioners to give their suggestions whether the cases can be closed or CBI can go ahead with the filing of charge sheets in them.

 

The apex court had passed the order after it was informed that the agency had filed closure reports in two cases despite there being difference of opinion among CBI officials.

 

The CBI had informed the court that there were till date 20 such cases where officers had differed on what further action needed to be taken.

 

The court had directed the agency to place the documents of all 20 cases within five days before CVC for its perusal and the corruption watchdog was asked to file its report in four weeks.

 

It had said CVC, along with other two vigilance commissioners, will examine the documents and file their report in a sealed envelope on what should be done in those cases.

 

DIG Ravi Kant Sharma, who supervises the coal scam probe, along with other two officers of the same rank, had said that the investigating officer (IO) had opined to close one of the cases which was rejected by him but his officers approved the opinion of IO after which closure report was filed.

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Tatas ready to airborne again with SIA Airlines, finally!

Since 1953, the Tata group has been trying to get back into aviation. Now it is ready with not one but two partners, Singapore Airlines and Air Asia to take the skies again. The re-entry of Tatas also brings some sense of relief and responsibility in the airline business

The Tatas love to be in the air; they made waves when Tata Sons started Tata Airlines way back in 1932.  It was renamed as Air India International in 1946, became Air India for short and by 1953 got nationalised. Subsequent attempts by the Tata group to be in airline business, when they roped in Singapore Airlines, twice, also did not get them anywhere.  But, whoever has heard of Tata Sons giving up on their legitimate quest for success?

 

Now Tata-SIA Airlines is a reality, in as much as the Civil Aviation Ministry has cleared, just the other day, for them to go ahead with the project.  Earlier, as is required by law, the Home Ministry had to issue the security clearance for the directors, which gave its approval of Prasad Menon (Chairman), Mukund Rajan (Tata sons brand custodian and chief ethics officer) and SIA's Executive Vice President, Mark Swee Wah.

 

Official order for issuance of No Objection Certificate is expected to be sent soon to Tata-SIA Airlines, on receipt of which the next course of action is to submit their application to the Director General of Civil Aviation (DGCA) for obtaining the airline licence.

 

Here again, as Airline Regulator, DGCA will carry out their own inspection in regard to the technical capabilities of the airline applicant (like staff, engineering set up, type and quality of aircraft etc) to start the airline.  Once this is complete, the airline is registered by them as "a scheduled airline" in the country to commence passenger operations, and issue the Air Operators' Permit (AOP).

 

It would appear that hectic preparations are underway for them to commence operations, presumably in June this year, if not earlier. In the meantime, the domestic airline, Air Asia, in which Tatas are associated are also in the final lap to get the clearance to take the sky, in spite of the petitions and objections that other domestic airlines had made through their Federation.  Air Asia will be a regional low-fare operator in the southern region, covering two- and three-tier cities and towns, and planning not to go to Mumbai and Delhi, the expensive airports.

 

Now that the clearance and scheduled operations of Tata-SIA Airline is only weeks away, it is amply clear that these two airlines will be able to greatly supplement and complement each other in extending service to the weary air traveller.  This combination of a full service domestic airline in the form of Tata-SIA Airline, and a low fare "associate" in the form of Air Asia will be a boon to the passengers, who await their inaugural service, soon!

 

It is sad to note that despite the DGCA objections to Spice Jet on the issue of Re1 ticket, both IndiGo and Air India have some out with similar sales campaign, though with different conditions, all of whom are in the red.  It is time these two Tata associated airlines take the sky so as to bring some sense of relief and responsibility to this airline business.  Also, we strongly feel that the rule of 5/20 applicable to the airline for international travel will also find its way to be scrapped, sooner than later.

 

In the real sense, it will be the survival of the fittest!

 

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)

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