Home >Companies >People >Divi’s Lab CFO Kishore Babu goes on 3-month leave due to insider trading probe

Divi’s Laboratories Ltd chief financial officer L. Kishore Babu has gone on a three-month leave starting Saturday after the Securities and Exchange Board of India issued an impounding order-cum-showcause notice against him earlier this month on insider trading allegations.

“During the interim period, Mr. Venkatesa Perumallu Pasumarthy, General Manager (Finance and Accounts) will perform all the non-statutory functions of the Chief Financial Officer," Divi’s Laboratories said in an exchange filing.

Sebi on 1 July had issued an order, in which it alleged Babu, his son Praveen Lingamneni and six others had made unlawful gains to the tune of 74.1 lakh in July 2017 for trading with the company’s stock based on unpublished price sensitive information related to US Food and Drug Administration’s clearance for its Unit-II at Visakhapatnam.

The order said that Babu, due to his position as CFO, allegedly got information about US FDA lifting its import alert on the facility on 7 July 2017, a Friday, while the information was filed with exchanges on the morning of Monday, 10 July 2017.

On 10 July 2017, Divi’s Laboratories had announced that the US FDA had informed the company it would lift its import alert against its unit-II at Vishakhapatnam. The import alert was issued in March for violations of good manufacturing practices as well as for refusing the regulator’s inspection.

The announcement on Monday boosted the company’s stock as much as 10% to its intra-day high before closing 8% higher from Friday’s close at 735.40 per share, according to National Stock Exchange’s historical data. This Friday, the stock ended at 2,263.40 per share, 2.7% higher than Thursday’s close.

On 7 July itself, Babu’s son Lingamneni bought shares and stock futures of Divi’s Lab worth a total of 3.81 crores and sold most of the shares and futures for 4.15 crore on 10 July after the announcement of the clearance was made. This resulted in an unlawful gains worth 34.6 lakh for Lingamneni, as per the order.

“Further, it was also observed that L Kishore Babu has funded the trades of Praveen Lingamneni," SEBI said.

Others named in the SEBI order also made similar alleged trade, the order said.

The regulator issued an order impounding nearly 97 lakhs, which includes the unlawful gains and interest, from the Babu, his son and six others for alleged insider trading, and a showcause notice against them for the unlawful gains.

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