Mumbai: Capital market regulator Securities and Exchange Board of India, or Sebi, on Tuesday barred Pyramid Saimira Theatre Ltd (PSTL) from trading in the securities market for seven years following irregularities in its 2006 initial public offering, or IPO.

The theatre chain operator had floated its IPO in December 2006. Subsequent investigations by Sebi found that the company had allotted 98.5% of shares reserved under the employee category to “seven persons who were not its employees". In collusion with Pyramid Saimira, these individuals received the allotted shares and sold them to make collective profits of Rs2.31 crore, Sebi said.

Tuesday’s order, passed by M.S Sahoo, whole-time member of Sebi, said, “PSTL aided and abetted the seven persons to corner shares of PSTL under the employee category to the detriment of the common investors."

P.S. Saminathan, managing director, Pyramid Saimira Theatre, described the order as “ridiculous" and said the company would appeal to the Securities Appellate Tribunal and “every other forum available to us".

“While they have mentioned in Para 10 of the order there is no proof of PSTL sharing the spoils with the IPO investors, they have proceeded against us in a whimsical manner," he said.

According to Tuesday’s Sebi order, the firm’s IPO was subscribed 15.5 times in the retail category, 28.09 times in the high networth individual, or HNI, category, 17.18 times in the qualified institutional buyer, or QIB, category and only 0.015 times in the employee category, excluding the applications of the seven persons.

“But for the artifice employed by PSTL and the seven persons, there would have been a shortfall in subscription in the employee category, which would have gone to other categories having over subscription. Thus, I conclude that PSTL assisted the seven persons to don the cloak of the employees and helped them to corner the shares under the employee category of the IPO of the PSTL," Sahoo wrote in the order.

In an interim order in April, Sebi had barred Pyramid Saimira promoters Nirmal N. Kotecha and Saminathan from trading in the securities market for allegedly forging a Sebi document in December 2008 that would allow the firm to make an open offer.

Under takeover laws, any entity that acquires more than 15% in a firm needs to make an open offer for at least another 20%.