Electrosteel Castings Resolves Insider Trading Case with SEBI

On Thursday, a total of 15 entities, including promoters and officials of Electrosteel Castings, reached a settlement with SEBI in an insider trading case by paying a settlement amount of ₹18 crore. In addition, a SEBI committee directed these entities to return unlawful gains along with interest, amounting to ₹11.68 crore.

As part of the settlement, Electrosteel Castings' Managing Directors, Umang Kejriwal and Mayank Kejriwal, along with other entities, have voluntarily agreed to stay away from the securities market for six months.

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Background of the Case

The settlement order follows the submission of 15 separate settlement applications on April 26, 2024. In these applications, the entities sought to resolve the proceedings without "admitting or denying the findings of fact and conclusions of law."

SEBI’s Chief General Manager, Santosh Shukla, confirmed the conclusion of the proceedings, stating: "In accordance with the settlement regulations, it is hereby ordered that the ongoing proceedings against the applicants, as per the Show Cause Notice (SCN) dated February 26, 2024, are concluded."

SEBI’s Investigation

SEBI conducted an investigation covering the period from May 17, 2020, to January 6, 2021, to examine trading activities in the Electrosteel Castings share price (ECL).

The investigation aimed to determine whether certain entities engaged in trading while in possession of unpublished price-sensitive information (UPSI) regarding the proposed amalgamation of Srikalahasthi Pipes with ECL, violating the Prohibition of Insider Trading (PIT) regulations.

Key Findings

SEBI issued a common Show Cause Notice (SCN) on February 26, 2024, alleging violations of insider trading rules. The regulator identified the UPSI period as August 18, 2020, to October 5, 2020, when the proposed merger was announced on October 5, 2020.

Several connected entities, including Electrocast Sales India and G K & Sons Pvt Ltd, allegedly traded in ECL shares during this UPSI period while having access to confidential information.

Role of Key Individuals

SEBI further alleged that insiders Madhav, Umang, and Mayank Kejriwal had disclosed UPSI to their associated entities. Additionally, Mayank Kejriwal was accused of trading in ECL shares and passing the information to Asha Kejriwal, who also allegedly engaged in insider trading.

Other individuals mentioned in the notice include:

• Priya Manjari Todi
• Ashutosh Agarwal
• Gouri Shankar Rathi
   

They were accused of trading in ECL shares while possessing UPSI. SEBI’s order stated that all applicants, except Umang and Mayank Kejriwal, gained an estimated notional profit of ₹8.18 crore from these transactions.

Regulatory Actions & Settlement

SEBI concluded that the applicants had violated insider trading regulations. Following the issuance of the SCN, the entities submitted revised settlement terms through individual letters on August 23, 2024. These revised proposals were approved by SEBI’s high-powered advisory committee, enabling a resolution.

After making the required settlement payments and remitting the disgorgement amounts individually, all 15 entities officially settled the case with SEBI, as per the final order.