First time offense it appears but the flip side is this was basically the majorly promotor family, 2nd level & 3rd level connected persons indulging in this blunder. It does seem co-ordinated to an extent.
Edited out part of original post
Now they’ll need to do damage control and put up a formal communication on this.
SEBI has fined their related entities in the past but that was for circular trading in illiquid scrips to optimize capital gains some years ago. Not for trading in Lux Ind itself.
Disclosure: Invested
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This incident does damage the reputation of the promoters but it is more like some ‘’ chindipana".
thankfully doesnt affect the underlying quality of the business. These traditional family run business will stumble to market realities with such incidents and hopefully will course correct as the mcap dip will make the accused a villain in the family.
interested in this arnd levels of 2500 or so …
disc: not invested
Of course this issue is gravely concerning and exposes the risk of investing in smaller companies. There are many institutions like LIC invested. Even they cannot foresee such issues.
Stock has fallen by 20% today on high volumes. Who is buying. How soon investors will forget this issue.
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I started investing recently in stocks, and I made good enough allocation to this given the underlying fundamentals and good track record of the management.
This was unexpected and now wondering given that the business continues to do well and if this is a one time blip, should one continue to hold or book significant loss on capital.
What does experience from previous such incidents tell us? Any suggestions?
in december SEBI has fined Titan company Ltd for violating insider trading norms and fined its two employee . If due consent of Promoter this happened and they get financial gain than this can be a concerns if you see cash statements
nothing is evident from there they they sold or buy … but if some person buy by hearing on some casual talks than it may pose good buying opportunity… but one thing is sure it will take time to reach previous levels and it may slide further … one must take own call based n their risk appetite .
I had gone through the order and found nothing is passed against the company nut in name of individual entities against which the order is passed
orders ;
Orders can be Challenged , but the depth at which the sebi made enquiry is really eye opener how with sound reasoning of mind the orders are passed they are self speaking with due legality
Disc : invested in company
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Just want to understand what are implications of such insider trading on company’s future trajectory or share prices ? Does this leads to FII/Big investors exiting or any other implications ?
What is best course action - Hold or exit for Retail investors - we have seen from precedence in history
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Here are few links for similar cases in similar profile companies.
Am sure there are many more
For Lux
- Promoter - Udit is a party but didn’t seem to have gained from transactions, hence no fines either - though responsible for UPSI negligence
- iIl gains Quantum all put together is sub 3 cr, damage to lux mkt cap is 1000X is already done
- Does this impact business- likely not, sector has tailwinds
- Does this raise Q mark on corporate governance perception- all will depend on transparency, communication from company here onwards, atleast hangover to stay for sometime
- Market has short memory when performance is good - one can see that Main promoter was involved in criminal case ( one can google) - much severe issue
Damage is done, will be a learning, prior to the insider trading ( May 21 period ) prices were 2100 type. Pain at max could be till that point - however business stays sound and valuations can be under stress till results and assurance+communication from management doesn’t pacify, settlement is reached with SEBI, and hopefully market moves on…
Impressed with SEBI investigation, like @zygo23554 calledmout, very disappointing on mgmt part to fail on discloures of this investigation ( assuming investigation was known to promoters)
Invested
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As zygo mentioned earlier, SEBI had fined related entities earlier. No lessons learnt, but tempted to go for quick bucks illegally again!
SEBI’s financial penalties will not suffice. Unless criminal proceedings and jail sentences for insider trading are handed out, these acts will continue.
For minority investors, caveat emptor is the cardinal principle always.
This is ridiculous from management. Such incidents taint the image of the company. Its already 20% down. Even though sector has tailwinds people will shy away from this co and move towards others.
Random thoughts : if i see trough other lens the SEBI is helping remaining proprietor group in open day light as the growth is visible from their quarterly results and they can take home the stock at much lower price . Reality is not always reality sometime perception overrides the reality and become reality . Market sometime create huge illusions .
ask simple question will the product will last for next two years or not or is the company going to close it’s operations … if answer is YES that create a strong case of exit …
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More than market we should focus on facts which speak louder. Fact is , there is a corporate governance issue which has been exposed. It is about the trust in the management. You never know how market will react but the trust is lost now and it will take time to regain this
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Have been invested in Lux. While this event is certainly a turn off, and hurts the credibility the management has been trying to build over the past few years, have concluded not to sell/exit.
Plainly, this is a minor matter of passing on results to friends/family. And unfortunately, this is widespread in the industry. By saying this, it’s not to give the management a pass, but for the portfolio there is limited utility in thinking extreme on this for the sake of it.
If there was a suspicion on diversion of cash flow, say by acquiring an unlisted related pvt entity or issuing ICDs or plans to enter a different line of business, I would have been far more pessimistic.
Certainly, there is merit in saying Lux will need to put efforts in gaining back some credibility which has been lost due to this, and the probability of heavy multiple de-rating during bad times has increased.
As far as the 20% drop goes, i think at 4000-4500 its fairly valued, better not to watch the price reaction and interpret the materiality of the event based on it. (which we all subconsciously do, but does not serve us well in the long run)
Primary reason to be invested in Lux in the first place is due to the industry. Leaders with scale in the innerwear industry have really strong trends ahead of them, and coupled with the quality of financials (FCF generation) makes it net-net attractive. Need to keep monitoring and one should balance risk in the portfolio by assigning a probability to an adverse event (minority unfriendly action) here in the future and value it accordingly.
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Clarification by Mr. Udit Todi, Executive Director, on SEBI Interim Ex Parte Order
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Not an expert but here is what seems to be case
- Its an interim order by SEBI authorities, with provisions of appeal/hearings
- This does seem one sided enquiry and order ( no matter how thorough), where accused are not given any representation yet per Udit todi submission
In a practical world there will be settlement, how soon don’t know, Intellect design case was closed after 3 years.
Interesting response from Udit Todi.
Effectively saying they were never in the know about this (which means they couldn’t have declared this to the exchanges at all) and that his version was not heard or even sought. Hence the order is pending investigation and that the management will challenge the conclusions drawn by officer. The letter also categorically denies sharing any sensitive information as referred to in the order.
This is likely to take a few weeks at the very least, at worst years 
The market may come to its own conclusions in the meanwhile.
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Mr. Pradip Kumar Todi and Mr. Udit Todi sent on leave and Independent Committee constituted for an audit. Seems like corrective measures are being taken by the company.
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It is true that it will take a year or so.
We can easly see that controlled selling is taking place. Most of the fund houses will cut their exposure or many will be forced to come out because of their policy and this will keep a drag on the share price.
We need to monitor next quarter shareholding and hope to see 3-5% reduction in FI/DI and equal increase in retail participation!
But I am really confused about the whole episode because of amount of money in quetion. No doubt it is leader in its sector. Hope I should get enough courage to purchase for long term after burning my fingers in Manpasand🤣
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I am going through the same dilemma, whether to add or not. Maybe, today’s results will give me the conviction. I had been through the mill, in a couple of other instances, where I dived in headlong, like this and burnt my hands. So, there is a lot of memory & muscle memory of acting on such circumstances. As far as share holding pattern, I will probably worry less since if Lux comes through this, others will rue on the basis of acting , just on a policy guideline alone. I am hoping that today’s result will strengthen the belief
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