Divi's Labs CFO seeks legal help on SEBI's impounding order

Hyderabad-based Divi's Laboratories informed the Bombay Stock Exchange on Thursday that the Securities and Exchange Board of India (SEBI) "has passed an Impounding Order cum Show Cause notice against L Kishore Babu, Chief Financial Officer of the Company and others, for alleged charges of Insider Trading in the securities of the Company during July, 2017." The company also informed that "Kishore Babu has informed that he is seeking legal advice and will respond to the Order."

During the day, the share prices of Divi's Laboratories slipped 1.94 per cent. Those in the market do not see this as a major fall in the current scenario but conside it an issue the company and its key officials may need to attend to quickly as it puts the spotlight on corporate governance, an area where the company may not want to show any slippages.

Earlier on Wednesday, SEBI in its impounding order had said that it "conducted an investigation into suspected insider trading activities of certain entities in the scrip of Divi's Laboratories for the period July 07, 2017 to July 10, 2017 to ascertain whether certain entities had traded in the scrip on the basis of unpublished price sensitive information in contravention of the provisions of SEBI Act, 1992 read with SEBI (Prohibition of Insider Trading) Regulations, 2015.

In the order against Babu and seven others, signed by G Mahalingam, wholetime member of SEBI, it impounds "the alleged unlawful gains of a sum of Rs 96,68,182.14 (alleged gains of Rs. 74,08,024.35 + interest of Rs. 22,60,157.79 for the period July 10, 2017 to January 24, 2020." Other than Babu, those named are Praveen Lingamneni, Nagesh Lingamaneni, Sri Lakshmi Lingamaneni, D Srinivasa Rao, Radhika Dronavalli, Gopichand Lingamaneni and Pushpa Latha Devi, who the order says, "were identified as "insiders" who had, directly or indirectly, traded in the scrip during the investigation period."

The developments relate to a time period when the US Food and Drug Administration (USFDA) had lifted the Import Alert on the Company's Unit-II at Visakhapatnam.