Deepak Nitrite promoter shr buy will attract insider norms, says SEBI

12 Jul 2022

A tentative plans by the promoters of Deepak Nitrite Ltd to raise their stakes through open market buying of the company’s shares has not received the regulatory green light.

The promoters who were planning to buy the shares of the company included its chairman and managing director, Deepak Mehta, and its executive director and chief executive officer, Maulik Mehta.

As of Jun 30, the direct stakes of Deepak Mehta and Maulik Mehta were 16.01% and 0.1% respectively, and the total promoter holding was 45.7%, according to data from Informist Corporate Fundamental Database.

In February, Deepak Nitrite wrote to the Securities and Exchange Board of India in February seeking an interpretive letter under the informal guidance scheme norms.

The company asked SEBI whether open market purchase of its shares by its promoters would be in compliance with the insider trading norms given that the date and pricing of a qualified institutions placement issue the company was likely to make before Jan 26 was not announced yet.

A qualified institutional placement issue is an issue of fresh shares by a company made directly to eligible institutional investors and governed under separate provisions in the issue of capital rules.

SEBI’s reply to Deepak Nitrite in April, which was disclosed on its website today, clarified that promoters are covered in the definition of ‘insider’ and any selling or buying of the shares by them would attract the test of compliance with the insider trading rules.

The markets regulator said that information on details pertaining to any pending issue of shares that were only in the knowledge of insiders would qualify as unpublished price sensitive information.

The only exception to prohibition of trades by insiders under the SEBI rules is for specified insiders who are perpetually in possession of unpublished price sensitive information and who have publicly disclosed a trading plan in advance.

The trading plan, according to the rules, must stipulate basic parameters such as nature of trade, whether it will result in buying or selling, and the value of trades or the number of shares to be traded.

Deepak Nitrite has not disclosed any such trading plan for its promoters. Its promoters will, therefore, not be able to buy shares from the open market without complying with the insider trading rules.