Decoded: Of 'Pandora Papers', insider trading and Biocon link

The name of Allegro Capital, an entity the Securities and Exchange Board of India (Sebi) investigated for insi­der trading, has turned up in the ‘Pandora Papers’ —  a global investigation of offshore entities. Its director Kunal Ashok Kashyap, according to the report published in The Indian Express, is also associated with Deanstone Trust — set up through another entity owned by John McCallum Marshall Shaw, husband of Kiran Majumdar-Shaw, the executive chairperson of Biocon. It’s noted that offshore entities can be set up for genuine business purposes and the parties cited in the Pandora Papers have denied any wrongdoing. Here’s all you need to know about the controversy following the report:

What order had Sebi originally passed?

The markets regulator had investigated Allegro Capital over insider trading and asked the company and Kashyap, also its major shareholder, to pay Rs 24,68,751 and imposed additional penalties in an order passed on July 8.

Why does it matter now?

Kashyap’s name has now featured in the ‘Pandora Papers’. The Centre has now ordered a multi-agency probe into the offshore secrets of wealthy elites. 

What was the Biocon link with the Sebi order?

Sebi’s order against Kashyap was also linked to Biocon. It was related to a 2018 announcement about Biocon’s global collaboration with Sandoz, an arm of the global pharmaceutical company based in Switzerland. The stock rose 5.6 per cent the day after the announcement. The Sebi order noted that Biocon was negotiating with another firm CIMAB and Sandoz concurrently. Kashyap had the overall responsibility of negotiating with CIMAB. The Sebi order noted that he may reasonably be expected to have knowledge of the Sandoz partnership and would come under the definition of being an insider.

“Even if, the noticees were bullish with respect to Biocon’s scrip in the long term, the sudden spurt / jump in volume shown by them during UPSI (unpublished price sensitive information) period has not been justified by them. To put it differently, noticees may have been bullish about Biocon but because of the UPSI, their purchases in the scrip of Biocon was advanced as they wanted to buy it before the price starts to increase after the publication of the announcement. Thus, the trigger for buying irrespective of the long term bullish view was on the basis of UPSI. Therefore, it is held that the noticees have dealt in the scrip of Biocon on the basis of UPSI and hence have violated Section 15G(i) of the Sebi Act,” said the Sebi order.

What action did Sebi take?

It went on to bar Kashyap and Allegro Capital from the market for one year. Besides the aforementioned disgorgement amount, they were penalised Rs 10 lakh each.

What happened afterwards?

The Securities Appellate Tribunal, which hears appeals against Sebi orders, stayed the direction in August; the matter is said to be still pending.

What was the reaction from the Biocon chairperson?

Kiran Mazumdar-Shaw, executive chairperson of Biocon denied any impropriety. “Media stories reporting on the Pandora Papers wrongly implicate my husband’s offshore trust, which is a bonafide, legitimate trust and is managed by Independent Trustees. No Indian resident holds ‘the key’ to the trust as alleged in these stories,” said her statement on Twitter.