Lux Industries was locked in 20% lower circuit at Rs 2808.30 after the Securities and Exchange Board of India (SEBI) barred Udit Todi, the executive director of Lux, and 13 other entities in an insider trading case.
Udit Todi is the son of Pradeep Todi, the managing director of Lux Industries.
The securities market regulator has ordered these 14 entities to square off their open positions within 3 months from the date of order or at the expiry of such contracts, whichever is earlier. An impounding penalty of Rs 2.94 crore has also been imposed by SEBI.
SEBI had received system-generated suspected insider trading alerts in the scrip of Lux Industries during the month of May 2021, when the company had made its corporate announcement regarding audited financial results for the quarter and financial year ending 31 March 2021.
From the announcement, it was observed that there was substantial increase in profits both on a quarter-on-quarter as well as a year-on-year basis.
Pursuant to the aforesaid corporate announcement, the price of the scrip of the company registered a rise by 40.75% on close to close basis within 3 consecutive trading days.
On an analysis of the alerts on the announcement related to financial results, SEBI found that a group of connected/related entities were observed to have taken long positions in the scrip. Subsequently, the entities squared off the said long positions, thereby generating substantial profits.
SEBI's examination, based on blood/family relationships, call data records and social media pointers, among others, revealed that Udit Todi had prima facie passed on the Unpublished Price Sensitive Information (UPSI) to his connected entities, Avani Todi, Sanjeev Bubna and Mohd. Mujtaba Khan.
Through Mohd. Mujtaba Khan, the UPSI was further passed on to Akshay Kapoor, who in turn passed on the information to Shubham Somani. Shubham Somani further passed the UPSI to other members of the Somani family and to other related entities, reportedly as per the order.
The order reportedly noted that these entities took substantial long positions in the scrip of Lux starting from 21 May 2022, before the announcement of the financial results, in their own trading accounts or by placing orders in the trading accounts of their connected entities.
SEBI said that preventive directions are warranted as Udit Todi has now been elevated to the position of executive director of Lux and has access to ongoing UPSIs of the company.
Through such acts, the entities have prima facie, violated the applicable provisions of SEBI Act, 1992, and of the PIT (Prohibition of Insider Trading) Regulations, 2015.
Lux Industries is one of the largest players in the hosiery business having a market share of approximately 15% of the organized industry. The company's products include men's, women's & kids innerwear, winterwear, socks & slacks for women in varied colours and designs.
The company reported 50% rise in consolidated net profit to Rs 100.04 crore on a 25% increase in income from operations to Rs 630.86 crore in Q2 FY22 over Q2 FY21.
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