Sebi directs Trafiksol ITS Tech to refund IPO funds of Rs45 cr to investors
Markets regulator has ordered the refund due to material misstatements in its prospectus and links to a shell entity. The IPO, oversubscribed 345 times, was halted after BSE flagged complaints from investors. Trafiksol used fabricated profiles and fraudulent documentation for a Rs17.7 cr software procurement claim
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New Delhi: Markets regulator Sebi on Tuesday directed Trafiksol ITS Technologies to refund Rs 45 crore raised through its IPO, following material misstatements in the firm's prospectus and suspected collusion with a shell entity. Trafiksol ITS is a Noida-based firm which provides intelligent transportation systems and automation solutions for traffic and toll management projects. In October, BSE postponed the listing of Trafiksol ITS Technologies Ltd (TITL) on its SME platform after investor concerns. The Rs 45-crore IPO was oversubscribed by over 345 times, attracting bids worth more than Rs 10,000 crore.
The regulator directed BSE to oversee the refund process which will be completed within one week from the date of this order. It also directed Trafiksol to take appropriate steps for cancelling the shares transferred to the demat accounts of bidders by the depositories. The order came after BSE received a complaint from the Small Investors' Welfare Association (SIREN), a day before Trafiksol's shares were slated to list on the exchange. In a 16-page final order, Sebi said that Trafiksol knowingly relied on fraudulent documentation submitted by a questionable third-party vendor (TPV) to justify the Rs 17.7 crore earmarked for software procurement in its prospectus.
Further, the regulator's probe revealed that the TPV -- is a company with dubious financials with no prior track record in software development and had been included in the IPO documents based on fabricated profiles and forged financial statements. Sebi also concluded that the TPV was a 'shell entity'. Meanwhile, Trafiksol claimed that it merely obtained a quote from the TPV, and it was selected after adhering to the rigorous procedures outlined in its procurement policy, and that the TPV was just an intermediate entity which would sub-contract the software development.
However, the company (Trafiksol) has conspicuously failed to provide a single credible justification for engaging such an entity in the first place. The company was involved in the cover up is based on the fact that it can be reasonably presumed that the Managing Director of the company (Trafiksol), given his long association with this sector, at the very least, was aware that the profile of the TPV's directors, which was submitted to BSE, was fabricated, the order said.
Therefore, Trafiksol's defence that it merely forwarded documents provided by the TPV to BSE without verifying their authenticity must be rejected, it stated. "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 order.
Balancing these considerations, the most prudent course of action is to direct the company to refund the money raised through the IPO, Bhatia said. Sebi also said that Trafiksol may approach the market afresh after the ongoing proceedings initiated by Sebi are concluded and subject to any directions issued therein.
