Capital Group is the “Big Client” in Ketan Parekh front running case!

The Los Angeles-based privately owned Capital Group, counted as one of the oldest and biggest foreign portfolio investors in India, is the “Big Client” that Sebi has mentioned in its 188-page order in the front running case orchestrated by Rohit Salgaocar, Ketan Parekh and others.

While the markets regulator has not mentioned the name of Capital in the report, there are enough giveaways that allude to the FPI based on the redacted [deliberately hidden for secrecy] names of funds mentioned in the five transactions, wherein the accused engaged in front running.

Fortune India matched the redacted names with the funds owned by Capital, one of the world's largest active fund firms, including the 'American Funds' range, with assets of over $2.7 trillion.

Several media reports have erroneously mentioned Tiger Global as the “Big Client” but Tiger Global does not “trade” as an “FPI” but the tech-focused VC invests largely in startups and deals in securities of its portfolio companies post listing.

Based on the Sebi order that clearly states: “various funds of an overseas entity which are engaged in the business of Foreign Portfolio Investment (hereinafter collectively referred to as “Big Client”), it is amply clear that Capital is the “Big Client”.

In fact, of the five stocks mentioned in the order, Capital continues to have exposure to some of the stock as of the September-end quarter (See Table: Piggyriding Capital).

The regulator has stated in the order that the name would be “supplied to Noticees during inspection of documents and to Hon’ble SAT and Courts during court proceedings. It is further clarified that in the statements/chats used in this order, the term ‘Big Client’ is used in place of the actual name appearing in such statements/chats. [sic]”

The Fortune India report will be updated in case Capital Group chooses to respond to a detailed questionnaire emailed to the FPI’s authorised spokespersons at Singapore and London offices.

The names of the Capital-owned funds and their details are mentioned in bold based alongside the relevant extracts of the order:

1) May 18, 2022: Trades in Tube Investments of India Limited.

“Illustration of NPI-based trades by FR 2 and FR6 in the scrip of Tube Investments of India Limited (TIINDIA/540762) on May 18, 2022. Upon analysis of the trade logs, it is observed that FR2 and FR6 have undertaken NPI-based trades against the orders of AXXXP Fund [AMCAP FUND], one of the funds of the Big Client, making an overall profit of INR 7,53,405.65.”

AMCAP Fund is a $91 billion fund that largely invests in US (90.2%) equities with 1.6% of assets invested in Asia & Pacific Basin.

2) September 19, 2022: Trades in HDFC Limited.

"Illustration of NPI-based trades by FR2 in the scrip of HDFC Limited (HDFC/500010) on September 19, 2022. On analysis of trade logs, it is observed that FR2 has undertaken NPI-based trades against orders of AXXXP Fund [AMCAP Fund], one of the funds of the Big Client, making an overall profit of INR 12,68,193.00 on that day.”

3) November 11, 2022: Trades in PB Fintech (PolicyBazaar).

“Illustration of NPI-based trade by FR1, FR2 and FR3 in the scrip of Policy Bazar Limited (PB Fintech/ 543390) on November 11, 2022, On analysis of the trade logs, it is observed that FR1, FR2 and FR3 have undertaken NPI-based Trades against the orders of two funds of the Big Client (Big Client) namely AXXXP Fund [AMCAP Fund] and Axxxxxxn Fund [American Fund], making an overall profit of INR 18,55,650 on that day.”

4) January 9, 2023: Trades in Cholamandalam Investment and Finance Company Limited

“Illustration of NPI-based trades by FR 2 and FR5 in the scrip of Cholamandalam Investment and Finance Company Limited (CHOLAFIN / 511243) on January 09, 2023. On analysis of the trade logs, it is observed that FR2 and FR5 have undertaken NPI-based trades against the orders of AXXXP Fund [AMCAP Fund], one of the funds of the Big Client, making an overall profit of INR 70,63,705.40.”

5) April 5, 2023: Trades in the stock of Titan Company Limited

“On analysis of the trade logs, it is observed that FR1 and FR2 have undertaken NPI-based Trades against the orders of Sxxxxxxxxxxxd Inc. (SMALLCAP World Fund Inc), one of the Funds of the Big Client, making an overall profit of INR 10,88,086.20 on that day. “

The $77.9 billion SMALLCAP World Fund Inc is a global small-cap fund that invests in some of the world’s fastest-growing and most innovative companies, with market capitalisations of up to $6 billion.