Share sale by Crompton's ex-chief not insider trading: Analysts

Mumbai | Updated on July 20, 2011

Crompton Greaves saw a price erosion of 27 per cent in the last couple of trading sessions, but a majority of the market experts dismissed rumours of insider trading in the stock.

The stock was down from Monday's close of Rs 242.1 a share to Rs 176.95 a share at close on Wednesday.

There was speculation among market-men that the act of offloading a substantial number of shares by the erstwhile managing director of the company, Mr SM Trehan, in the last week of June could attract penalty under the insider trading norms of SEBI.

The company had, in fact, announced his selling to the exchanges on July 1 itself.

Mr Trehan retired as the MD of Crompton Greaves with effect from June 1.

“The decrease in share price is due to bad results and nothing else,” said an analyst at a fund house. “He (Trehan) had accumulated the said number of shares throughout his whole career with the company. Had the stock price gone the other way, no one would have cribbed.”

Spiralling copper prices, the main raw material for Crompton Greaves, was the main culprit said analysts. “This is a temporary phenomenon and things would get better after a couple of quarters,” said Mr Kishor Ostwal, CMD, CNI Research. “The company's business from Europe is not doing well and this is reflecting in the business performance in the first quarter.”

A section of analysts was of the opinion that Crompton's results would put a question mark on the premium valuation that the stock used to enjoy earlier.

“There was no indication by the company on an impending slowdown as early as two weeks ago when some analysts met the top management raising questions on transparency,” said the Head of Research of a large Indian retail brokerage.

Mr Arun Kejriwal, Founder KRIS Research, said: “In addition, purchase of aircraft by the company and a significant drop in margins has added to the pressure on the stock.”

The following link explains the code of conduct by the staff of the company with respect to insider trading:



Published on July 20, 2011

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