SEBI probing insider trading charges against Atul and Rahul Kirloskar

PUNE , 15 NOV 2018 : As the fight over control of business in Kirloskar family continues between brothers Sanjay Kirloskar on one side and Rahul and Atul on the other, it has now come to light that Securities and Exchange Board of India (SEBI) is probing insider trading charges against Rahul and Atul Kirloskar based on the documents filed in NCLT.

SEBI has been inquiring into allegations of insider trading in Kirloskar Brothers Ltd (KBL), the original company of the Kirloskar Group. It is alleged that on October 6, 2010, some top officials and few members of the promotor group, namely Gautam Kulkarni, Rahul Kirloskar, Atul Kirloskar, Alpana Kirloskar, (daughter of the Ansals responsible for the Uphaar Cinema tragedy in Delhi) Jyotsna Kulkarni and Arti Kirloskar sold 1,07,18,400 shares of KBL, representing 13.51 per cent of the total paid up share capital of the company to Kirloskar Industries Ltd (KIL), a public Limited company managed by the transferors. The total value of this transaction amounted to approximately INR 275 crore.

While Rahul, Atul, Alpana and Arti are Kirloskar family members, Gautam Kulkarni is former Vice Chairman of KBL.

Accordingly, SEBI had written a letter to KBL, inter alia stating that the shares of KBL were acquired by KIL when unpublished price sensitive information about financial results of KBL were not in public domain. The company had replied to SEBI referring to various correspondences and emails between KBL’s erstwhile directors, promoters and former employees.

In its letter to KBL, SEBI’s Assistant Director, Integrated Surveillance Department, Dr Deepali Dixit had sought details such as chronology of events pertaining to announcement of financial results on October 28, 2010 and circulation of agenda etc. SEBI had also sought information about the persons who were in possession of information regarding financial results. Besides, the regulator wanted the Company’s model code of conduct with regard to Insider Trading. SEBI also sought details about closure of Trading Window with regard to above announcements and had also made it clear that it was seeking all this information under Section 11 of SEBI Act.

KBL on its part, in its reply to SEBI, said that while examining declarations and pre-clearances provided by the Individuals of promoter group who sold the 13.51 per cent shares of KBL to KIL on October 6, 2010, it was noted that the promoters had declared that they did not possess any unpublished price sensitive information at the time of sale of shares.

However, KBL’s reply to SEBI said, while examining the Kirloskar Group-Management Operating Board, Annual Operating Plan and other relevant financial information, it has come to light that financial performance of the company was discussed collectively within the promoter group on a regular or periodic basis. This is therefore contrary to the disclosure made by the promoter group individuals that they did not have any unpublished price sensitive information at the time of sale of shares in question.

KBL, in its reply to SEBI, also said that it appears that the faction of the promoter group individuals were in possession of detailed financial statements of the company and such price sensitive information were circulated every month to the group of promoters by the finance department of KBL and the same was collectively discussed in the management operating board meetings. KBL has further said that it was the Group’s practice to review and discuss financial position of all the group companies in a joint meeting such as Kirloskar Group-Management Operating Board (KG-MOB).

The SEBI probe is underway into these allegations of Insider Trading against Atul Kirloskar, Rahul Kirloskar and others allegedly involved in the insider trading activities. The price of KBL fell after the news of business slow down hit the market resulting in a gain of approximately INR 100 crore to Atul Kirloskar, Rahul Kirloskar and others.

Incidentally, the Reserve Bank of India, recently, has granted the Kirloskar Group a licence to launch a non-banking finance company, namely Kirloskar Capital, a wholly owned subsidiary of Kirloskar Oil Engines Ltd . Mr Atul Kirloskar, Executive Chairman of Kirloskar Oil Engines Ltd, has committed Rs 1000 crore investment in three years.