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Money Feb 9, 2012

Did Manappuram insider bail out just before RBI deposit ban?

By Shishir Asthana

(Editor's note: Shares sold on 6 February 2012 have been changed from 16,63,000 to 5,00,000 after it was pointed out by a reader. AR Sankaranarayanan is a non-promoter group independent director and not related to the promoters as reported earlier).

The curious case of Manapurram Finance, the loans-against-gold company that was recently pulled up by the Reserve Bank of India (RBI), keeps getting murkier.

On Monday, 6 February, the RBI barred Manappuram and a related sole proprietary firm from raising public deposits, but even before the news was out, the wife of one of the company's non-promoter independent directors was selling shares in the company.

Reuters

Sarada Sankaranarayanan, wife of independent director AR Sankaranarayanan,sold 5,00,000 shares in the market at a price of Rs 57.75 through their broker Geojit BNP Paribas on 6 February before the RBI information was put in the public domain. Sale of shares continued the next day, when the same promoter sold another 8,63,000 shares at Rs 48.17. The shares opened lower when the market came to know about the ban.

Total proceeds from the sale on the first day work out to Rs 2.89 crore while on the second day it was Rs 4.16 crore. The average price of sale for the transactions works out to Rs 51.68 and the total proceeds added up to Rs 7.04 crore. The share currently trades below the average sale price at Rs 46.40, down 6 percent.

Does this sale amount to insider trading, when a member of the board sells shares before news that can have a material impact on the share price is widely disseminated?

Meanwhile, CNBC-TV 18 has reported that the central bank is contemplating regulating the gold loans sector. This is could be in the form of limits on the loan that a gold loan firm can give as a percentage of the value of the loan.

The RBI may also restrict the maximum interest that a gold loan firm can charge its customers, and also the penalties that gold loan firms can impose, CNBC-TV 18 reported.

P.S. Firstpost had predicted the gold loan bubble way back in August. You can read all about it here.

Manappuram Finance Ltd 080212 SAST

by Shishir Asthana

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