The market regulator is examining suspected violations of corporate governance and insider trading norms and possible price manipulation ahead of deal

The capital market regulator has sent a notice to United Spirits Ltd (USL) seeking an explanation for not informing its Indian shareholders about the $75 million deal that led to the exit of its chairman Vijay Mallya, two persons familiar with the development said.

The Securities and Exchange Board of India (Sebi) is examining suspected violations of corporate governance and insider trading norms and possible price manipulation ahead of the deal, they said.

A USL spokesperson confirmed the receipt of a request from Sebi, which moved two weeks after the deal between USL’s owner Diageo Plc. and Mallya, under which the businessman was absolved of responsibility for any irregularities that may have taken place at the Indian spirits maker under his watch.

Shares of USL had risen for five consecutive days till 25 February before the deal between the company and Mallya was announced late in the evening that day.

In these five sessions, the stock rose 17.5%, while the benchmark BSE Sensex declined 2.8%.

On 26 February, after the announcement, shares of USL gained 2.45% to close at Rs.2,729.85 apiece. The Sensex rose 0.8% to 23,154.30 points on 26 February.

“Non-disclosure of the deal to domestic shareholders is a gross violation of the corporate governance and listing regulations,” said J.N. Gupta, co-founder and managing director of Stakeholder Empowerment Services, a proxy advisory firm.

USL shares rose 1.61% to Rs.2,387.50 apiece on Friday while the Sensex gained 0.38% to 24,717.99 points.

 

Source:

http://www.livemint.com/Companies/CzlJ53JyblvWKIsToPhtbI/Sebi-notice-to-USL-for-not-disclosing-deal-to-shareholders.html

 

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