The Securities and Exchange Board of India (Sebi) on Wednesday passed an interim order banning Poonawalla Fincorp's MD and CEO Ajay Bhutada and seven others from the securities market after they were found guilty in an insider trading case.

Other than Bhutada, the regultor has barred Saumil Shah, Surabhi Kishore Shah, Amit Agrawal, Murlidhar Bagranglal Agrawal, Rakesh Rajendra Bhojgadhiya, Rakesh Rajendra Bhojgadhiya HUF, and Abhijit Pawar.

Sebi said that the eight people involved in the case made wrongful gains worth Rs 13.58 crore during the period under investigation. The funds have now been impounded by the market regulator.

On 10 February 2021, Adar Poonawalla-controlled Rising Sun Holdings announced acquisition of a 60% stake in the non-banking financial company (NBFC) Magma Fincorp (MFL) by subscribing to a Rs 3,456-crore preferential issue. Adar Poonawalla is the CEO of Serum Institute of India.

In July, the company was renamed from Magma Fincorp to Poonawalla Fincorp.

Sebi's surveillance alert system detected suspicious trading patterns in the shares of Poonawalla Fincorp, formerly known as Magma Fincorp ahead of the acquisition of a controlling stake by Adar Poonawalla-led Rising Sun Holding (RSHPL) in February 2021.

Shares of Poonawalla Fincorp (then known as Magma Fincorp) rallied over 177% in 15 trading sessions between 29 January 2021 to 19 February 2021.

Sebi said it found Abhay Bhutada had access to information surrounding the acquisition deal and he was connected with other entities involved in the case.

"It is noticed that there were phone calls amongst the Entities during the relevant period and the said phone calls were followed by transfer of funds. Further, it is also noticed that persons enjoying connection through phone calls, fund transfers, etc. have traded in the scrip of Magma in advance of the afore-mentioned event i.e. disclosure of the corporate announcement," Sebi said in the order.

In view of the above, pending conclusion of investigation, Sebi has directed the involved entities' bank accounts to be impounded to the extent of their liability in the insider trading case of Rs 13.58 crore. The involved individuals have been ordered to submit the impounded money into an escrow account within the next 15 days.

"If the Entities have any open position in any exchange-traded derivative contracts, as on the date of the order, they can close out/square off such open positions within 3 months from the date of order or at the expiry of such contracts, whichever is earlier," Sebi said.

On a consolidated basis, Poonawalla Fincorp's net profit surged 71.15% to Rs 64.54 crore on 14.88% decline in total income to Rs 487.65 crore in Q1 June 2021 over Q1 June 2020.

Poonawalla Fincorp is a Poonawalla group non-banking finance company that focuses on consumer and MSME financing. It offers a diversified product suite to address the growing financing needs of the retail financing and the enterprises.