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Sebi to probe alleged insider trading in Polaris scrip

BS Markets Bureau

The Securities and Exchange Board of India will look into the alleged insider trading in Polaris Software's scrip on the eve of the Chennai-based company's merger with Citigroup's Orbitech Solutions Ltd.

Asked about the rise in volumes and the price trend of the Polaris scrip prior to the merger announcement last week, Sebi chairman G N Bajpai said on Thursday "the market regulator will look into the matter".

On May 13, Polaris Software, in response to media reports about the merger with Orbitech, had informed the Bombay Stock Exchange that "the company was evaluating various options but there was no firm understanding with anybody."

But on May 22, the Polaris board approved the merger proposal. Between May 13 and May 22, the Polaris stock price gained around 5 per cent, from Rs 255.90 on May 13 to Rs 268.15 on May 22. Meanwhile, the volumes increased by a dramatic 202 per cent from 2.173 million shares on May 13 to 6.555 million shares on May 22.

According to the deal, the shareholders of Orbitech will receive 14 newly issued shares (face value of Rs 5) of Polaris for every 25 shares (face value of Rs 2) held in Orbitech by them.

On an equalised basis (Rs 5 each), the stock swap ratio is 1: 1.42 in favour of Orbitech. After the merger, Orbitech shareholders will hold a majority stake of 54 per cent in the new entity.

The turnover of the merged entity, to be known as Polaris Software Labs, will be over Rs 6 billion. It will also be the fourth largest player in the banking, financial services and insurance industry domain.

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