Tainted Galleon gets rid of stake in Edelweiss Capital

21 Nov 2009

Galleon Group, the US-based hedge fund whose co-founder Raj Rajratnam was arrested by the authorities for alleged insider trading, has sold its entire holdings in Indian investment banking and broking firm Edelweiss Capital. On Friday, through a series of block deals, Galleon sold out its 7 per cent holding (53 lakh shares) in Edelweiss at Rs485 per share, aggregating Rs256 crore.

According to Bombay Stock Exchange data, private bank IHAG Zurich bought 26 lakh shares, while Reliance Mutual Fund picked up eight lakh shares. The balance was bought by the Edelweiss Employees' Trust Fund. All the deals were done at Rs485 per share.

A large number of FIIs and local funds were in the race to pick up Galleon's stake in Edelweiss, which was up for grabs for over a month now, since the Wall Street firm's troubles began.

In October, soon after Galleon's main promoter was arrested by the law enforcement authorities in the US, the hedge fund announced winding up of its investments. On 22 October, Galleon Special Ops Fund had sold 9.5 lakh shares of Shriram EPC at Rs223 per share, worth about Rs21.2 crore.

In India, the US hedge fund had direct exposure to only two companies - Shriram EPC and Edelweiss Cap.

Galleon's exit from the financial services company is part of winding down of its funds, after its founder Raj Rajaratnam and five others have been charged with insider trading in the stocks of companies, including Google and Hilton Hotels.

With this sale, the stake of the Edelweiss promoters would go up by about 3 per cent from the current 38 per cent of the equity capital. Edelweiss Capital is promoted by investment banker Rashesh Shah, who has personal holding of nearly 17.4 per cent in the company.