GHCL says Pramod Jain indulged in insider trade

Gujarat Heavy Chemicals Ltd (GHCL), the soda ash and textiles maker, on Friday accused Pramod Jain, the largest non-promoter investor in the company, of spreading negative rumours about the company and simultaneously buying the company’s shares.

Jain, who holds over 6% of GHCL, had recently alleged that he was barred from attending the company’s board meeting on April 30.

However, GHCL promoter and chairman Sanjay Dalmia refuted this during a press briefing at his residence in New Delhi on Friday.

“He has not been barred from board meetings, as he is claiming. He resigned some months back, which became effective from April 30.”

“He is no more a director of the company, and that decision is irrevocable. We made a mistake in actually nominating him as a director,” Dalmia said.

According to documents available with DNA Money, Jain, through his companies L D Leasing and Credit Private Ltd and Pranidhi Holdings Pvt Ltd bought 925,000 shares of GHCL between April 17 and 24.

A GHCL official told DNA two other intermediaries of Jain —- a person named Deepak Bachhawat and Destiny Securities Ltd —- had also purchased 32,510 shares between April 17 and 24.

“Jain bought these shares when he was a director with the company. He hadn’t resigned back then, so he should have informed the BSE and Sebi about the purchases. This is a clear case of insider trading and we want the regulators to take appropriate action against him,” Dalmia said.

Responding to the charges, Pramod Jain told DNA Money: “I haven’t indulged in insider trading at all. I am a trader and I trade in shares everyday. I bought shares of GHCL and sold them, that is my business. Insider trading is based on some (prior) information, which is not the case here.”

Jain said the intermediaries were his ‘persons acting in concert’. “So, when they buy or sell shares, it’s not my concern,” he said.

GHCL sources said Jain has pledged his entire stake with private money lenders and he has given post-dated cheques to them.

“Jain is backing a small investor group and is asking GHCL to declare an open offer at Rs 125 per share through them,” he said.

The source said Jain is trying this so that he could sell some of his stake to pay off his own dues.

But Dalmia denied any open offer possibility. “We are not going to announce any open offer,” he said. Jain, on his part completely denied pledging his shares.

“My shares are not pledged at all. Dalmia is just trying to deviate from the real issue by saying all this,” Jain said.

Sebi banned top GHCL officials from trading in the share market on April 20. DNA Money had reported the drop in promoter shareholding, from 38% to 18%, on April 15.

Last week, the Securities and Exchange Board of India banned the GHCL promoters from dealing in the securities market for violating securities market laws including insider trading rules.

Meanwhile, the company in consultation with legal advisors said Sebi has wrongly alleged that GHCL has filed incorrect shareholding of promoters over the last four quarters.

“In our detailed objections, we have strongly contested the findings and orders of Sebi, factually and legally,” GHCL said. It also added that it did not plant any false information story to media last year to induce investment.

“We have given our reply to Sebi and expect them to consider our case. A similar case happened with Bharti Airtel also and Sebi, then, had asked them for a reply. Why they haven’t done that with us? Why does Sebi have two standards?” Dalmia asked.
Dalmia also said that as and when Sebi lifts its orders against them to trade in shares, they would increase their stake in the company from the existing 18% to “healthier levels” of earlier stake of 38%.

“We might own even more than 40% of GHCL if the situation demands,” Dalmia added.

Jain had, in a letter to Sebi, said he had withdrawn his resignation on March 27.
“During the course of my diligence on the working of the company, I found some serious irregularities” Jain had alleged in the letter.

A GHCL official said this was incorrect.

“We purchased all those companies before the economic meltdown. No one expected this recession to be so severe. For GHCL, the biggest growth will come from the retail segment,” Nikhil Sen, head of international business and strategy at GHCL, told DNA.