A significant trading error involving Clean Science & Technology Ltd. has brought to light potential weaknesses in India's block deal system, prompting regulatory authorities to consider changes to the existing framework.

The Incident

Avendus Capital's unit inadvertently executed duplicate trades while attempting to sell 24% of Clean Science shares, valued at approximately $300 million. The error occurred because the trades were conducted during regular market hours instead of India's dedicated 15-minute block deal windows.

Block Deal System Limitations

The incident highlighted key limitations in the current block deal system:

• Block deal windows only allow discounts up to 1%
• Clean Science shares were offered at a 13% discount, exceeding the block deal limit

Proposed Changes by SEBI

In response to this incident, India's Securities and Exchange Board (SEBI) has proposed several changes to the block deal system:

1. Tripling the discount limit from 1% to 3%
2. Raising minimum trade sizes from 100 million rupees to 250 million rupees

Block Deals in India's Market

The incident has drawn attention to the growing popularity of block deals in India:

• Block deals have overtaken IPOs as a preferred method for large investors to reduce holdings
• Market experts suggest that large block deals relative to company size should be conducted in separate block windows to prevent similar incidents

Implications for Market Participants

This trading error and the subsequent regulatory response highlight the need for:

1. Enhanced safeguards in the block deal system
2. Greater awareness among market participants about the limitations and risks associated with large trades
3. Potential improvements in trade execution processes to prevent duplicate transactions

As the Indian stock market continues to evolve, incidents like this serve as catalysts for regulatory improvements aimed at maintaining market integrity and protecting investor interests.

Clean Science & Technology , a specialty chemicals manufacturer, has clarified a significant error in a recent block deal that caused market confusion and volatility.

Block Deal Clarification

Clean Science & Technology confirmed that Spark Institutional Equities Pvt. Ltd. (SIEPL) made a punching error during a block trade, resulting in sell orders for significantly more shares than authorized. The error led to 6 crore shares appearing to change hands instead of the intended 2.5 crore shares.

Actual Sale Details

• Promoters involved: Ashok Boob, Krishnakumar Boob, and Parth Maheshwari
• Actual sale: Limited to 24% of outstanding equity (2.5 crore shares)
• Initial erroneous report: Suggested 56% stake sale

The company emphasized that the actual sale was much smaller than initially reported due to the trading error.

Market Impact and Stock Performance

The confusion surrounding the block deal led to significant stock volatility:

• Initial decline: 7%
• Recovery: 13% from day's low
• Current trading: 2.2% lower at ₹1,154.40

Clean Science & Technology shares have experienced broader declines:

• Past month: 9.5% decrease
• Year-to-date: 25.2% decrease

Next Steps

The selling promoters are awaiting a detailed explanation from SIEPL regarding the incident and the remedial steps to be taken. This incident highlights the potential impact of trading errors on market perceptions and stock performance.

Investors and market watchers will likely continue to monitor Clean Science & Technology closely in the coming days for any further developments or clarifications regarding this block deal and its aftermath.