The stock shot up 25% on heavy volumes since early March 2010—almost three months before its deal with Abbott was announced. Will SEBI look into what appears to be a possible case of insider trading?

On 21st May, Piramal Healthcare announced that it was selling a part of its business to Abbott Laboratories, ending months of speculation about what was going on in the counter. While that made the headlines, there was something else going on in parallel as well—a suspicious case of price rise on the back of large volumes. On 26 February 2010, Piramal Healthcare was trading at Rs397.85 and by 20th May—the day before the deal was announced—it had shot up to Rs570.10 on the National Stock Exchange. This meant a jump of 43%. In contrast, the Pharma index had gone up by just 3% during the same period.

The rise in price was backed by huge volumes. The average volume in January was 1.50 lakh. This went down to 52,115 in February. However, in March, as the discussions about the deal with Abbott progressed, the price shot up on huge volumes. In March, volumes skyrocketed to 71,146 shares per day, a jump of 47% over the January and February average. In April, volumes surged even further to an average of 2.12 lakh shares per day. On 20th May after the market closed, Piramal announced that it is selling its domestic formulations business to Abbott for $3.72 billion (approximately Rs17,112 crore). In the 16 days of trading in May, average daily volumes were an unprecedented 18.32 lakh shares.

Those in the know of the deal might have laughed all the way to the bank. The volumes in other pharma counters hardly budged from their averages. The correlation between the rising price of Piramal Healthcare shares, the rising volumes and the final announcement of the deal seems apparent to anyone who wants to see it. The question, do the regulators have any interest in seeing it?

The first line of regulators are the stock exchanges. They are not known to stir themselves into insider trading investigation. We have written to the Securities and Exchange Board of India whether the price rise, accompanied by large volumes over months and culminating in a deal, warrants an investigation but we have not heard from the regulator till the time of uploading this piece.

The Piramal Group has interests in healthcare, drug discovery & research, diagnostics, glass, real estate and financial services. The company recorded a consolidated operating income of Rs3,670 crore in the year ended 31 March 2010 while it posted an operating profit of Rs740 crore. In FY10, its Healthcare Solutions (Domestic Formulations) division reported sales of Rs2,000 crore. Piramal Healthcare, controlled by Ajay Piramal, was put together through a series of acquisitions.