Sebi today barred PG Electroplast and its four promoter-directors from dealing in capital markets and from raising funds, after they were found guilty of diverting funds and indulging in manipulative activities with respect to an IPO in 2011.
A probe by Securities and Exchange Board of India (Sebi) found that PG Electroplast, an electronic manufacturing service provider, had suppressed material facts in its IPO prospectus as well as siphoning off and diverting the IPO proceeds for the purpose of purchasing its own shares.
In its final order passed today, Sebi barred the firm and its promoter-directors -- Anurag Gupta, Vishal Gupta and Vikas Gupta -- from dealing in the capital markets for 10 years.
Besides, Sebi has prohibited the entities from raising any capital from the securities market for 10 years.
However, the market watchdog said that the period of ban already undergone by the company and its promoter-directors pursuant to the interim order on December 28, 2011 wherein the entities were resticted from the capital markets "shall be taken into account for the purpose of computing the period of prohibition imposed in this order".
PG Electroplast had failed to disclose information in the prospectus regarding funds raised through ICDs (Inter Corporate Deposits), purchased orders placed for plant and machinery and that repayment of ICDs would be made from IPO proceeds. It had also diverted the IPO proceeds to entities who had purchased its shares, among others.
Accordingly, the company has also been directed to take "urgent and effective measures to recover all the money recoverable on account of investments in ICDs, contracts for purchase of land, etc, which have not fructified till now."
The company will have to report the progress on the same by May 10, 2014, on the basis of which further directions would be considered by Sebi, the order said.
"It cannot be a coincidence that such fraudulent activity had its orgin prior to the IPO of PGEL ((PG Electroplast Ltd) and resulted in the siphoning off and diversion of proceeds of that IPO," Sebi said in the order today.
"The violations of law observed with respect to PGEL and its promoter directors, if not dealt with sternly, could give rise to situation where raising of capital would become extremely difficult even for honest companies," it noted.
PG Electroplast IPO had opened on September 7, 2011 and closed on September 12, 2011.
Sebi had initiated a probe after it had noticed that the firm's share-price fluctuated within few days of its listing.
Pending probe into the matter, the market regulator in December 2011 had restricted the firms and its promoters from dealing in securities as well as raising capital from the stock markets till further orders.
