The Securities and Exchange Board of India has alleged that Pranav Adani, the nephew of billionaire businessman Gautam Adani, violated insider trading norms by sharing with his brothers-in-law price-sensitive information about the Adani Group’s open offer to acquire shares of NDTV, the Economic Times reported on Wednesday.
The market regulator sent a show cause notice on October 15 to Pranav Adani, his brothers-in-law Kunal and Nrupal Shah, and father-in-law Dhanpal Shah in the matter. Kunal and Nrupal Shah are the sons-in-law of Pranav Adani’s uncles, Vasant and Vinod Adani.
Pranav Adani is the director of Adani Enterprises, the flagship company of the conglomerate headed by Gautam Adani.
SEBI alleged in the notice that calls exchanged among Pranav Adani and Kunal, Nrupal and Dhanpal Shah showed that they had communicated frequently during the unpublished price sensitive information, or UPSI, period, according to the Economic Times.
SEBI regulations prohibit company insiders from sharing unpublished price sensitive information with any outside entities. Using sensitive information that is not available to the public at large to deal in shares is insider trading, which is a criminal offence.
The Adani Group acquired majority stakes in NDTV on December 30, 2022, after it acquired a 27.26% equity stake in the media firm from co-founders Prannoy Roy and Radhika Roy.
Over four months earlier – on August 23, 2022 – the manager of the Adani Group’s open offer, JM Financial, had informed stock exchanges after the close of the day’s trading about a public announcement pertaining to NDTV.
The announcement said that Vishvapradhan Commercial Private Limited, along with AMG Media Networks Limited and Adani Enterprises, would acquire up to 26% of the share of capital of NDTV from public shareholders.
SEBI said in its notice that as the announcement was made after close of trading on a market day, it remained unpublished price sensitive information until the development was disseminated through stock exchanges, the Economic Times reported.
When markets reopened on August 24, 2022, the shares of NDTV rose sharply in value, opening about 2.5% higher than the previous day’s close and ending nearly 5% on the National Stock Exchange.
SEBI said that the announcement on August 23, 2022 “materially affected the price of the scrip of NDTV upon coming into the public domain”, the newspaper quoted the notice as saying.
According to SEBI, Kunal Shah bought shares of NDTV several times during the UPSI period, some of these instances being in the weeks and days leading up to JM Financial’s announcement.
On August 8, 2022 his purchases accounted for close to 9% of the total trading volume in the stock on the National Stock Exchange, which the market regulator described as significant, the Economic Times reported.
SEBI alleged that the trades by Kunal Shah led to profits of Rs 52.89 lakh, and that Nrupal and Dhanpal Shah also earned unlawful profits of Rs 52.7 lakh and Rs 32.6 lakh.
The regulatory body has initiated proceedings to determine if penalties should be imposed on Pranav Adani, Kunal, Nrupal and Dhanpal Shah for violating insider trading regulations.
The Economic Times sent email queries to SEBI, the Adani Group and Kunal, Nrupal and Dhanpal Shah seeking their stands, but did not receive responses.
Adani Group’s acquisition of NDTV stake
On August 23, AMG Media Networks Limited, a wholly-owned subsidiary of Adani Enterprises, bought 100% of the equity stakes in Vishvapradhan Commercial Private Limited for Rs 113.74 crore.
Later in the month, the Adani Group announced that it will acquire a 29.18% stake in NDTV through Vishvapradhan Commercial Private Limited. NDTV had then said that the takeover was done without the consent or any sort of notice served to Radhika Roy and Prannoy Roy.
The acquisition was possible as Vishvapradhan Commercial Private Limited had given a loan of Rs 403.85 crore to NDTV in 2009.
According to the terms of the loan, the company held the right to exercise its warrants and convert the loan amount into equity shares – which it did after being bought by the Adani Group.
Also read:
NDTV: How Adani acquired a firm controlled by an Ambani aide to launch a hostile take-over bid
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