Varun Beverages' Ravi Jaipuria Settles Insider Trading Case With SEBI

Ravi Kant Jaipuria, chairman of PepsiCo Inc.'s India bottler Varun Beverages Ltd., has settled with SEBI an insider-trading case by paying Rs 56 lakh towards settlement charges.

It was alleged that Jaipuria had communicated unpublished, price-sensitive information relating to a strategic partnership between Varun Beverages and PepsiCo for sale and distribution of Tropicana to two persons. Based on the information, shares of Varun Beverages were traded.

The latest order came after Jaipuria approached Securities and Exchange Board of India to settle the proceedings initiated against him for alleged violation "without admitting or denying the finding".

"This settlement order disposes of the aforesaid adjudication proceedings initiated against the applicant viz. Ravi Kant Jaipuria vide SCN...dated Dec. 21, 2021," the markets regulator said in its order passed on Tuesday.

In its order, the regulator observed that two entities -- Spank Management Services and Fenton Investment -- traded Varun Beverages shares during the UPSI period from Dec. 21, 2017, to Jan. 4, 2018. Both of these entities, through their directors or owners, were connected to Lemon Tree Hotels Ltd. in which Jaipuria was also a director.

According to Lemon Tree's annual report for FY18, it was observed that Patanjali Govind Keswani was the chairman and managing director of Lemon Tree Hotels. Jaipuria was the director and Arvind Singhania was an independent director. On analysing the annual returns for 2016-17 filed by Spank Management Services at the Ministry of Corporate Affairs, it was observed that Lemon Tree was one of the associate companies of Spank.

Further, Jaipuria, Keswani and Singhania were known to each other personally. Jaipuria and Keswani -- between Dec. 27, 2017, and Jan. 2, 2018 -- were staying in the same hotel in Bangkok. During the same period, Singhania was also staying in Bangkok in a nearby hotel.

It was noted that Fenton (Singhania) and Spank (Keswani) had placed an order to buy Varun Beverages' shares and sold all of them immediately after an announcement related to the strategic partnership was made public.

The orders were placed by Fenton (Singhania) and Spank (Keswani) on Dec. 28, 2017, and Jan. 2, 2018, respectively, when all three of them were in Bangkok, and Jaipuria was in possession of the UPSI. It was therefore alleged that Jaipuria communicated the UPSI to Singhania (Fenton) and Keswani (Spank), and violated insider trading rules.

In this regard, a show-cause notice was issued to Jaipuria in December 2021. Pending adjudication proceedings, he proposed to settle the case.

Following this, SEBI recommended that the adjudication proceedings initiated against the applicants may be settled on payment of Rs 55.90 lakh towards the settlement amount. Consequently, Jaipuria remitted the amount and settled the case with the capital markets regulator.