The Hindu Business Line : Ambanis cleared of `insider trading' in L&T-Grasim deal

THE Ambanis have been given a clean chit by the SEBI committee which went into allegations of insider trading in the purchase of shares in Larsen & Toubro and subsequent sale to Grasim Industries in November 2001.

"... ..unpublished price sensitive information was not received by Reliance Industries Ltd/Ambanis as insiders of L&T and as such, they cannot be held liable for violation of regulation 3" (of the SEBI regulations on insider trading)," SEBI said in its report on its Web site on Thursday.

The reprot clearing the Ambanis comes around two years after complaints of insider trading were made against them.

The Reliance group had 6.6 per cent of L&T's share capital as of March 2001, which declined to 3.92 per cent in October 2001. However, Reliance group crossed 5 per cent shareholding in L&T on November 5, 2001 and by November 12, its holdings reached 10.14 per cent. On November 18, 2001, RIL and Grasim Industries (GIL) entered into an agreement for sale of the former'sstake in L&T to Grasim at Rs 306.60 per share, which was a premium of 47 per cent over the then prevailing market price of Rs 208.50.

And here is why the committee concluded the Ambanis were innocent of insider trading. It says: "The fact is that unpublished price-sensitive information must come to insider by being an insider. Having held so, the committee finds that in the present facts and circumstances of the case there is nothing to suggest that L&T was even aware of the developments relating to the said transaction between RIL and Grasim before November 18, 2001 and that "unpublished price-sensitive information" was received by RIL or Ambanis from L&T as an insider.

"The committee further agrees with RIL's submission that the information is RIL's self generated information not emanating from L&T... ... and the notices (the Ambanis) did not get the information by virtue of being insiders. Therefore, in the present case the testing ground that "unpublished price sensitive information" was received by insider as an insider is missing thereby taking the said transaction out of the purview of the said Regulations."

SEBI's order has also noted that prima facie facts and events suggest that there had been some exercise by RIL and Grasim independently before their transaction on November 18, 2001, — the proposal for the deal was initiated by J M Morgan Stanley with Grasim on November 6, 2001, and the fund arrangements by Grasim were made on November 12, 2001.

However, the report said that RIL had submitted strongly before the committee that the said information did not emanate from L&T. It said: It had been submitted by RIL that the information of the impending sale was with RIL not because it was "connected" with L&T, but because it was a potential seller. The Ambanis also had information of this by virtue of being Managing Directors of RIL, and not by virtue of they being Directors of L&T.

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Ambanis cleared of `insider trading' in L&T-Grasim deal