The Securities Appellate Tribunal (SAT) has upheld the Securities and Exchange Board of India’s (Sebi) decision, ordering Trafiksol ITS Technologies Ltd to refund ₹45 crore to investors and halt its share listing.
This ruling follows Sebi’s 3 December order, which found the company in violation of multiple regulations related to its SME initial public offering (IPO).
Trafiksol, which raised ₹45 crore through its oversubscribed IPO in September, has been directed by the market regulator to refund investor funds within one week. The BSE has been tasked with overseeing the refund process.
The decision comes after Sebi’s investigation uncovered serious issues with the IPO, including material misstatements in the company’s prospectus and possible collusion with a ‘shell entity.’
A detailed order from the appellate tribunal is awaited.
In the Sebi ruling, whole-time member Ashwani Bhatia had emphasized the importance of protecting investors' interests, noting that their funds had been locked up for months. "The most prudent course of action is to direct the company to refund the money raised through the IPO," Bhatia had said.
Trafiksol’s IPO, which had been met with overwhelming interest, was oversubscribed by more than 345 times. It was initially scheduled to list on the BSE SME platform on 17 September. However, following complaints about the misallocation of funds, BSE delayed the listing and requested an investigation, ultimately leading to Sebi’s intervention.
Sebi’s action followed a series of irregularities uncovered during its inquiry. Trafiksol’s IPO documents indicated that the raised funds would be used for software procurement. However, investigations revealed that the third-party vendor (TPV) selected for the procurement was a ‘shell entity’ with questionable financials.
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Sebi’s probe found that the TPV’s financial statements were signed under dubious circumstances, and the vendor had no proven track record in software development.
The markets regulator order also criticized Trafiksol for failing to provide credible explanations for its engagement with the suspicious vendor. While the company claimed to have followed proper procurement procedures, Sebi dismissed this defense, stating that Trafiksol’s senior management, particularly its managing director, must have known that the TPV’s credentials were fabricated.
Despite Trafiksol’s claim that it was merely acting as an intermediary, Sebi concluded that the company was involved in a cover-up and could not proceed with the IPO. Sebi further instructed the company to cancel the shares that had already been transferred to investors' demat accounts.
The company, which specializes in intelligent transportation systems and traffic management solutions, has been informed that it may reapply for an IPO once the ongoing proceedings are resolved.
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