Trafiksol ITS IPO cancelled: SEBI directs to refund investors' money

Trafiksol ITS IPO cancelled: SEBI directs to refund investors' money 

On Monday, the market regulator Securities and Exchange Board of India (SEBI) cancelled Trafiksol ITS IPO, which was previously halted by BSE for investigation purposes, and told the company to refund the money to investors raised via Trafiksol ITS Technologies IPO. 

Trafiksol ITS IPO Cancellation- SEBI Detailed Order

Apart from stating that the Singed into a 16-page order, the Whole-time Member of SEBI, Ashwani Bhatia stated, "In view of the foregoing, I, in the exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act, 1992 read with sections 11, 11(1), 11(4) and 11B and regulation 296 of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, hereby issue the following directions:

a) Trafiksol is directed to repay the money paid by investors who have been allotted shares in the Initial Public Offering.

b) BSE shall oversee the refund process in collusion with the Bankers to the issue, which will finish in one week from the date of this Order in the matter of Trafiksol ITS Technologies Ltd. The interest accrued on the proceeds of the issue in line with the aforementioned orders in the Interim Order will also be replenished proportionately to investors;

c) Upon crediting the fund into the respective bank account of applicants, depositories shall transfer the shares of the Company allotted based on the IPO allotment to a separate demat account opened in the name of the Company; 

d) The Company shall take suitable measures for canceling shares that have been thus transferred to the above-mentioned account by the depositories.

Story So far

• The company filed a Draft Red Herring Prospectus (DRHP) with BSE on May 31, 2024, as part of its proposed IPO to be listed on the SME Platform of the stock exchange. This IPO was to comprise a fresh issue of 64.10 lakh equity shares of the company.

• Ekadrisht Capital Private Limited served as the only Book Running Lead Manager for the issue.

• The issue was oversubscribed 345.65 times and the shares were originally scheduled to be listed on September 17, 2024.

• This time, Sebi received a complaint from the Small Investors' Welfare Association-SIREN, alleging the inclusion of one such object of the issue to buying the software from a vendor of which the financials were questioned and did not file any annual financial statements with the Ministry of Corporate Affairs (MCA).

• In compliance with the contention above, the BSE has, after consulting the SEBI, suspended the share listing. 

• Came into operation on October 11, 2024, by Sebi to open an investigation against BSE for holding the offering proceeds in an interest-bearing account, pending further directives.

• Meanwhile, the inquiry is ongoing and Sebi will be adjudicating other issues, including the false allegation of false representation of the company's financial statements.

However, subject to the final order, SEBI has allowed Trafiksol to approach the market afresh after the ongoing proceedings initiated by SEBI are concluded.

Conclusion

One of the recent actions from SEBI is the cancellation of Trafiksol ITS IPO. Whether or not a regulatory authority refuses to be an angel to the securities of a constitutive corporation, investors should have good lessons from the regulators. Withdrawal of applications from BSE for public allotment of securities must be done in a seven-day time frame, including calculated interest. It has drummed strict action; this was based on grievance financial misrepresentation. Trafiksol can come back to seek a listing after the investigation. This indicates the attentiveness of SEBI regarding such matters affecting investors and the integrity of the market.

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