Amar Singh, general secretary of the Samajwadi Party, has written to the Securities and Exchange Board of India (Sebi) alleging insider trading in the shares of Mukesh Ambani-controlled Reliance Petroleum Ltd (RPL), on July 9, 2008, just days before his party voted in favour of the current ruling alliance at the centre.
In the letter addressed to C B Bhave, chairman of Sebi, Singh has alleged that firms connected with Reliance Industries Ltd (RIL), which holds 70 per cent in Reliance Petroleum, had engaged in insider trading with prior knowledge of RIL’s plan to sell 4.01 per cent in its subsidiary RPL in November 2007.
| ‘WINDFALLGAINS’ | ||
| Entity name | Quantity* (in million shares) | Profit** (In Rs crores) |
| Aarthik Commercials Pvt Ltd | 9.0 | 45 |
| Fine Tech Commercials Pvt Ltd | 9.0 | 32 |
| Dharti Investment and Holdings Ltd | 13.9 | 50 |
| LPG Infrastructure India Pvt Ltd | 9.0 | 45 |
| Vinamra Universal Traders | 16.5 | 45 |
| Pipeline Infrastructure India Pvt Ltd | 9.0 | 45 |
| Gujarat Petcoke and Petroproduct Supply Pvt Ltd | 9.9 | 55 |
| Relogistics (India) Pvt Ltd | 8.0 | 9 |
| Relpol Plastic Products (P) Ltd | 13.0 | 44 |
| Darshan Securities Pvt Ltd | 8.5 | 31 |
| Total | 105.8 | 401 |
| * rpl shares sold on nse f&o between Nov 1 and 6, 2007 ** Profit made from short sales Source: Letter written by Amar Singh to Sebi | ||
The letter, which is similar to one written by another MP — Abani Roy from the Revolutionary Socialist Party — on June 20 this year, alleges that firms related to RIL have made a profit of Rs 1,000 crore from insider trading by entering into futures contract in the first week of November 2007.
Singh has provided a list of 10 “RIL-connected entities” who sold short in the futures market. These entities have sold 10.58 million shares in the Futures & Options (F&O) market and made a profit of Rs 401 crore in the first week of November 2007, the letter alleged.
Singh claims the information to back this figure has been obtained from sources in the stock exchanges and the market, without giving specific details from whom it was obtained.
“Insiders built up short positions in RPL futures at high prices and in massive quantities totaling more than 10 crore shares. Because of these sales, the price of RPL fell from the high of Rs 295 on November 01 to levels of around Rs 210,” said Singh, who has described himself as a personal friend of Anil Ambani, younger brother of Mukesh Ambani.
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Going short is usually a strategy adopted by speculators in the futures market when they believe that the future price of a share will fall. Under this, a speculator sells at a high price and agrees to repurchase the same shares at a lower price at a future date. A profit would be made if the share price declined, but the speculator would incur a huge loss if the bet went wrong.
Further, Singh said after these futures contract were entered, RIL sold RPL shares in the cash market. Sebi Chairman C B Bhave, who was in the capital to attend a seminar, declined to comment when asked about the letter written by Amar Singh.
In a written reply to an emailed questionnaire, a Reliance Industries spokesperson said, “We are not aware of the allegations in the letter Shri Amar Singh is stated to have written to the Sebi Chairman. RIL by itself or through the instrumentality of other entities has not at any stage indulged in any insider trading of RPL shares.”
In an announcement to Bombay Stock Exchange (BSE) on November 26, 2007, Reliance Petroleum said Reliance Industries had sold 18.04 crore of shares representing 4.01 per cent of its share capital for Rs 4,023 crore.
In a separate announcement on the same day, Reliance Petroleum said RIL sold the shares in two different periods. The first sale representing 2.54 per cent in RPL was undertaken between November 6 and November 14, 2007, and the second sale of 1.47 per cent between November 15 and November 23, 2007.
In the same letter, Amar Singh said, “details (of the share sales) were neither available in the block or bulk trade details of BSE and NSE, nor was it put on the stock exchange notice board till November 24, 2007. This selling ensured that the price of Reliance Petroleum shares remained low and allowed exit to the short selling entities at huge profit.”