L & T Finance drops below Rs 80 yesterday ~ Insider Trading!?

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L & T Finance drops below Rs 80 ~ Insider Trading!? ~ 14-Mar-2014

Both parent company Larsen and Toubro and L & T Finance Holdings issued notifications to the BSE and NSE that Larsen & Toubro will be Offering For Sale Shares of L & T Finance through the Open Window on the Exchanges today through Broker Credit Suisse Securities (India) Pvt Ltd

The Notice that announces the Floor Price of Rs 70 carries a paragraph in the Larsen & Toubro Letter requesting the Exchanges to disseminate the Floor Price Information only after Trading Hours on March 13,2014,a day before the Offer for Sale is being made as per SEBI Circular

Clearly this Offer for Sale is to bring down Parent Larsen & Toubro Equity Stake in L & T Finance Holdings to 75%

Questions arise….here are five of them :

Q 1 : Clearly the fall of L & T Finance from Rs 88 levels in the morning to close at Rs 79 levels in the afternoon appears to be related to this Notice of parent Larsen & Toubro to Offer Shares of L & T Finance at Rs 70 Floor Price today ! ~ who knew this before hand to take advantage of this Low Floor Price and sell Futures or even stock at higher levels yesterday !….and is it just a coincidence that The Offer For Sale Notifications were timed to be announced on the Day that L & T Finance began trading in the F & O Segment  ?

Q 2: What Time did the Exchanges receive the Notices from Larsen & Toubro yesterday  and how were these received..email,fax,hand delivery of letter….could not the Exchanges have released the first Notice earlier and then later the Notice that announced the Floor Price ?

Q 3: Check the Books of Brokers who have done an abnormally  high Volume of Trade yesterday in L & T Finance in Spot & Futures to see if Insider Trading is indicated and if so who has perpetrated it?

Q 4: Why is the parent Larsen & Toubro selling the shares of L & T Finance now  at such a low floor price of Rs 70,given that  the latter is a front runner in being awarded a banking license that should be announced shortly  by RBI….as it could, in all probability, have got a much better price later if L & T Finance is  awarded a banking license!?

Q 5 : Has RBI told,on record or off, Larsen & Toubro or L & T Finance that the latters banking application will only be considered if the parent bring down the stake to 75% in L & T Finance,the license aspirant and applicant before they announce who have been awarded the new Licenses !?…and this has led to Larsen & Toubro coming out with the Offer For Sale today and it has nothing to do with March 31,2014 Financial Year Closing!….or more importantly does this Offer For Sale signal that L & T Finance will not get a Banking License !?  

There is clearly something amiss in the timing and pricing of this Offer For Sale and clearly there has been Insider Trading yesterday in L & T Finance related to the Notices for this Offer send yesterday to the Exchanges

For the sake of all Investors Confidence and Credibility of our Exchanges,SEBI must investigate these Questions posed above

Larsen & Toubro and L & T Finance are market leaders in capitalisation and widely traded and held…..it is important that SEBI certifies that all is in order !   

 

12 thoughts on “L & T Finance drops below Rs 80 yesterday ~ Insider Trading!?

    1. I agree Mohammed…The whole system is skewed against the retail investors….they become easy prey and suckers to insiders and operators and manipulators especially in bullish times….All these Education & Protection Measures for Small Investors are quite ineffective and tame in practice and reality and often turned a blind eye too….Having said this,Returns from Indian Equities can be there without having to resort to Insider Trading…..Retail investors need good and credible advising on what to buy and what to stay away from according to their risk profiles…this is where my company and me try to add value to make a difference…..unfortunately small investors and even HNWIs get unduly influenced by their Brokers and relationship managers and glossy research reports and micro and macro guidance on trends from FII Broking Houses of inappropriate stock ideas and also by what they see and hear from Experts and Anchors and Reporters and even Management on TV Stock Channels…..they typically come in when the markets are at a peak and record highs rather than being smart and buying at market lows and having the temperament and patience to wait it out….,many look for instant gratification just like Instant Coffee !

  1. Thumbs Up to you for yet another excellent analysis of a case for insider trading. Questions you asked are very pertinent. However, I am curious to know whether you would highlight this directly to SEBI as well?

  2. @Sumit,
    I am also curious to know that have you written to SEBI ?Because every time something happens,we expect others to take up the matter on our behalf.We all have to collectively put pressure,like we all have done in PCAS matter.

    1. Hi Hemant….L & T Finance is held very widely among all my clients purchased at various levels ….SEBI is quite aware of this particular matter of Offer for Sale and the implications and possibility of Insider Trading as is mainstream media….we and our network has ensured this as have few others too…..Remember it was SEBI that issued the letter dated March 13,2014 granting exemption to the parent L & T from any restrictions and prohibitions from using the stock exchanges Special Window mechanism for the Offer for Sale if they have sold the share in the previous 12 weeks before making the announcement for the Offer for Sale….having said this we are not activists….we have a choice we can exercise to hold the scrip or not….but it is alarming how the big caps and reputed listed companies like L & T,Reliance and Maruti are practising Corporate Governance !….What is also alarming is also the apparent collusion in many such situations between Exchanges,Investment Bankers,Brokers,Listed Corporates and even the Regulator,especially when it is seen to turn a blind eye and not act proactively or reactively…..Institutional Shareholders & Genuine Independent Directors are our best bet in defeating Board Resolutions that short circuit Minority Shareholders….they vote against these and even are prepared to go to court when Board and Company decisions and actions negatively impacts the value of their holdings…the form may be legal but substance over form often indicates unethical behaviour by listed corporates and their promoters,board and management….through this blog and often through SCRIP STANDPOINT and SCRIP TEASE Modules on my company’s website I do warn about many Companies…last week we also covered the Piramal Delisting titling it Delisting or Hoodwinking!?…..I’m sure SEBI,like they have in Maruti’s case,will also investigate this L & T Offer For Sale for Insider Trading and Timing and Pricing of the Issue

  3. Our insider trading cases r dealt very very leaniently and hence insider trading is happening here regularly.no body actually want to punish the culprit.so let us wait for next insider trading to happen.

  4. Dear Gaurav,please don”t get me wrong.My question was to Sumit,hence i had mentioned that @Sumit.Hence i ask Mr.Sumit that did he wrote a letter to SEBI?

    1. Hey Hemant & Sumit….Economic Times has quoted me in their Mumbai Edition today on the Share Price Drop in L & T Finance ahead of the Offer for Sale announcement…have given the weblink in a new blog today on this issue…check it out…we all do what we can…perhaps we can do much more though !

  5. @ Hemant,

    With due respect to your question to me. Does’nt it apply to you as well. You are as curious to know whether I have written to SEBI ……similar to my curiosity whether Gaurav Sir has written to SEBI or not? Anyways, just to answer to your question, I have done my bit. I assume you would not like me to provide you with a proof.

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