Regulator Sebi on Wednesday barred Midfield Industries and its officials from accessing the securities market for a period of two years for misutilisation of IPO proceeds.
Officials of the firm include M Madhu Mohan Reddy and Ashok Sagar Mudumba. At the time of IPO, Reddy acted as chairman and managing director of the firm while Mudumba was the executive and non-independent director of the company.
Sebi noted that Midfield made an initial public offering (IPO) through a prospectus in July 2010 with an issue size of 45 lakh equity shares, aggregating to Rs 59.85 crore.
As per the prospectus of the company, the IPO proceeds were to be utilized for expansion of capacities at its existing plants, setting up new facilities, augmenting long-term working capital requirement of the company, general corporate purposes among others, Sebi said.
Instead, the firm utilised the funds for purposes such as paying for company's existing overdraft dues, income tax dues, payments to suppliers not mentioned in the prospectus and payment of salaries, among others.
In this regard, Sebi said "the information disclosed in the prospectus regarding the objects of the issue was false because the manner in which the IPO proceeds were utilized was for purposes other than those stated in the prospectus."
By doing so, the firm and the officials have violated provisions of Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) and Issue of Capital and Disclosure Requirements norms.
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Accordingly, the firm and the officials have been restrained from "accessing the securities market and further prohibit them from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, whatsoever, for a period of two years, " Sebi said.
Besides, during the period of restraint, the existing holding including units of mutual funds, of the company and the officials shall remain frozen.
In separate orders, the regulator has imposed a fine of Rs 5 lakh each on Universal Enterprises and Ranmak Works for indulging in fraudulent trade in illiquid stock options segment of the BSE.
The trades executed by the firms involved reversal of buy and sell positions, which created artificial volumes and violated PFUTP norms.
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