Lotus Eye Hospital & Institute Faces Insider Trading Violation, Resulting in a Rs. 10 Lakh Penalty!

Introduction

As the Indian markets wrapped up the final trading session of the calendar year 2023, a soft trading day was observed. Despite the subdued performance in the overall market, the Nifty Mid-cap and small-cap indices displayed resilience, advancing 0.43% and 0.48%, respectively. However, amidst this market scenario, a micro-cap company has surfaced with an intriguing development. Lotus Eye Hospital & Institute Ltd, a company trading below Rs 100 with a market cap of Rs 173 crore, has found itself entangled in an insider trading violation, leading to a penalty of Rs 10 lakhs.

Company Overview

Incorporated in 1990, Lotus Eye Hospital and Institute Ltd specializes in providing ophthalmology and related services. With a 52-week high of Rs 111 and a low of Rs 52, the company has been navigating the market with a market cap of Rs 173 crore.

Insider Trading Revelation

A recent press release from the company reveals a violation of SEBI (PIT) Regulations 2015, specifically related to contra trading, involving the sale of 2,07,000 shares by a designated person. The individual at the center of this controversy is Mr. S Rajkumar, identified as a promoter. The violation occurred between November 28-29, 2023, with a total worth of Rs 1,75,85,080.

Details of the Violation

– Designated Person: Mr. S Rajkumar

– PAN of Designated Person: ASIPR9896E

– Designation: Nil

– Functional Role: Nil

– Category: Promoter

– Details of Violation: Contra trade involving the sale of 2,07,000 shares of the company between 28-29 November 2023, worth Rs 1,75,85,080.

– Date of Intimation by DP to Company: 05-12-2023

– Date of Intimation by Company to Exchanges: 06-12-2023

Penalty and Action Taken

In response to the violation, the Audit Committee took swift action, imposing a penalty of Rs 10,00,000 on Mr. S Rajkumar after providing an opportunity for him to be heard. The rationale behind the penalty is rooted in the expectation that as a promoter, designated persons should adhere to a code of conduct, and violations of insider trading regulations cannot be tolerated.

Additional Insights

Previous Instances: None reported since the last financial year.

Mode of Penalty Transfer: Online transfer of Rs 10,00,000 to SEBI IPEF account on 29-12-2023.

Financial Performance

Despite the recent setback, Lotus Eye Hospital & Institute Ltd has delivered noteworthy returns, showcasing resilience in the market. The stock has yielded returns of 6.32% in the last one year and an impressive 37% over the last three years.

Conclusion

The revelation of an insider trading violation within Lotus Eye Hospital & Institute Ltd serves as a cautionary tale in the Indian stock market. The penalty imposed on the promoter, Mr. S Rajkumar, underscores the significance of adhering to stringent codes of conduct to maintain the integrity and transparency of the market. As we embark on a new year, market participants will undoubtedly keep a keen eye on such developments, emphasizing the importance of ethical and responsible trading practices.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.