Capital market regulator Sebi has slapped a total penalty of Rs 15.50 crore on Bharatiya Global Infomedia, its chairman and MD and two other senior executives for violating various securities market norms in relation to the company's IPO.
The regulator found that Bharatiya Global Infomedia Ltd (BGIL) and its officials siphoned off funds from the company's Initial Public Offer (IPO) as well as suppressed and provided wrong facts in its offer document.
"Accordingly, a total penalty of Rs 15.50 crore is imposed on all the noticees," the Securities and Exchange Board of India (Sebi) said in an order today.
Individually, Sebi has imposed a penalty of Rs 6 crore on BGIL, Rs 5 crore on the company's CMD Rakesh Bhatia, Rs 4 crore on executive director Sanjeev Kumar Mittal and another Rs 50 lakh on firm's manager (finance) Rajeev Kumar Agarwal.
The market watchdog has found that BGIL had made wrong and misleading disclosures with respect to utilisation of IPO proceeds as stated in the prospectus, it had not disclosed source of funds already deployed and to be repaid from the IPO proceeds, that investments were done in contradiction with that mentioned in the prospectus.
One of the charges of non-disclosures pertained to BGIL not disclosing in its prospectus about certain ICDs (Inter Corporate Deposits) worth Rs 15 crore. Further, these ICDs were repaid from the IPO proceeds.
"The said sequence of events clearly shows that BGIL has utilised the IPO proceeds for purpose other than the one mentioned in the RHP/Prospectus and there is a clear deviation from the same," Sebi said.
"The company entered into a financial arrangement by taking the said ICDs and therefore, the company cannot say that the same was not a necessary disclosure," it added.
Besides, the company had diverted the IPO proceeds to promoters and promoter related entities, funding certain clients out of the IPO proceeds who had in turn indulged in synchronised and circular trades on the listing day of company's shares.
It also held that the company's directors who were part of the audit committee had failed to notice the fund diversion did not make any recommendations to the firm.
BGIL had come out with an IPO during the period of July 11, 2011 to July 14, 2011.
Sebi had initiated a probe into the case after noticing wide fluctuations in the price of the company's scrip.
