In an unprecedented regulatory action, the Securities and Exchange Board of India (SEBI) has cancelled the public listing of SME Trafiksol ITS Technologies, who’s listing was earlier put on hold pending investigation, and ordered a full refund to its investors within a week.
“I cannot also lose sight of the fact that the funds of the investors who have been allotted shares in the IPO have remained locked-in for close to three months now. Therefore, the issue cannot be put on hold till the other findings of the Investigation are adjudicated,” SEBI’s whole-time member Ashwani Bhatia said in the final order on Tuesday.
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“…the most prudent course of action is to direct the company to refund the money raised through the IPO. The company may approach the market afresh after the ongoing proceedings initiated by SEBI are concluded and subject to any directions issued therein,” Bhatia said.
The regulator has directed the company to return the nearly Rs 45-crore funds raised through the IPO, along with any interest amount earned over the past two-months. Stock exchange BSE has been directed to oversee that the refund is processed in a week of the order.
Trafiksol has also been asked to cancel the shares allotted after they are transferred to a separate demat account by the depositories.
The move comes after BSE and the regulator had halted the listing of Trafiksol, a software provider for traffic systems, on BSE’s SME platform in September due to a complaint regarding the use of the proceeds a day prior. The issue was open between September 10 and 12 and was oversubscribed 345 times.
The regulator has raised concerns about the poor credentials of the third-party vendor (TPV) from which Trafiksol was to purchase software, which entails nearly 40% of the issue proceeds. SEBI concluded that the third-party vendor was a shell entity and suspected the managing director and company’s involvement in covering up the vendor’s fraud.
“It can be reasonably concluded that the managing director of the company, given his long association with this sector, at the very least, was aware that the profile of the TPV directors was fraudulent,” the order said.
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