The company's scrip shot up by 48 per cent in a span of two months before its board of directors on Thursday took a decision to approve the sale of the Mahindra group's 24 per cent to Otis Elevator of the US which holds 45 per cent stake.

The scrip which was ruling at Rs 314 on May 25 zoomed to Rs 466.40 by Thursday, indicating a jump of 48 per cent. The rise is intriguing as the BSE Sensitive index (Sensex) had gone up by only 16 per cent (from 4060.08 to 4728.78) during the same period. ``The market was certainly bullish, but the Otis scrip outperformed the market and theindex,'' said a broker.

The volume of business in the scrip also showed a phenomenal rise. While earlier 1,500 shares used to be transacted on a daily basis, the volume shot up to 22,139 shares on the Bombay Stock Exchange on Thursday. The combined volume of the Otis scrip on the BSE and the National Stock Exchange on Thursday works out to 36,039. On the other hand, the combined turnover was only 3850 shares on July 15. Otis officials claimed that ``it is an illiquid scrip and FIIs were active in trading since the last two months.''

Speaking to this newspaper, Otis Elevator officials refuted any insider trading and said the main reason why Otis scrip has shot up in the last two months is due to the restructuring exercise being undertaken by the company. ``This is not for the first time Otis has outperformed Sensex. Besides, the real estate industry is showing signs of recovery which will boost demand for our products,'' said Aloysius Lobo, Dy General Manager (Communications), Otis Elevators.

Ironically,while the company's scrip was rising every day, its net profit took a 45.35 per cent fall to Rs 1 crore for the quarter ended June 1999 from Rs 1.83 crore in the same period of the period last year. The company claimed that the profits were down as it provided Rs 5.17 crore for voluntary retirement scheme (VRS).

When contacted, SEBI officials refused to comment on the issue. SEBI had charged top officials of Hindustan Lever Ltd for insider trading two years ago. Although the Appellate Authority in the Finance Ministry revoked the SEBI charges, the matter went to the High Court. SEBI recently sent a show-cause notice to the managing director of ABS Industries for insider trading prior to the merger of ABS with Bayer.

SEBI formulated insider trading laws only three years ago. However, market sources admit that insider trading was frequent done on the Indian stock markets. ``Brokers, directors and other company officials act in tandem and buy/sell shares of a company. It's very difficult to prove thecharges. Many companies are yet to enforce a code of conduct for the share transactions of their employees. Even in companies where such a code is enforced, ways have been found to circumvent detection,'' said a broker, adding, ``This (Otis) is not the first time that any scrip has moved up before any major announcement... Sebi has been too slow to react.''

The chairman of the Mahindra group and Otis Elevator, Keshub Mahindra, said in a statement the stake sale would enable the US company to better integrate Otis India with its global operations. ``This decision is also in line with the restructuring of the businesses of the Mahindra group. In the overall interest of all the shareholders of Otis India, the Mahindra group has decided to disinvest its holding in favour of Otis US,'' he said.

Otis India, currently has a workforce of 3,000, of which around 320 are in its Kandivali factory. In fact, the company has reduced its strength from the original 654 employees at the factory, through a voluntaryretirement scheme last month, at a cost of Rs 39 crore. Otis India was formed in 1953 as a joint venture between the Mahindras and Otis Elevator Company, a fully-owned subsidiary of United Technologies Corporation.