Sebi slaps Rs 80 lakh fine on four entities for diverting IPO funds

Sebi has slapped fines totalling Rs 80 lakh on four entities for diverting proceeds from the initial public offer of Birla Pacific Medspa Ltd.

A fine of Rs 20 lakh each has been imposed on Ketan Vora, Proprietor of New Fashion, K V Impex, Jigar Vora, Proprietor of J C Enterprise, and Dinesh Vora, HUF Proprietor of Vora Associates (noticees).

An investigation was conducted by Securities and Exchange Board of India (Sebi) into the initial public offer (IPO) of BPML for the period from July 7-15, 2011.

The scrip of BPML was listed on BSE on July 7, 2011, after the IPO was open for subscription from June 20-23, 2011.

The price of the scrip had seen sharp volatility on the listing day, closing at Rs 25.35 apiece, 154 per cent more than the issue price of Rs 10 per share, as per Sebi.

BPML received IPO proceeds of Rs 64.17 crore and an amount of Rs 34.91 crore was transferred by the company to various entities for the purchase of medical equipment in accordance with its prospectus.

According to the order, the funds were transferred for purchase of medical equipment whereas the entities were in the business of dealing in cloth trading and commission agent, among others.

Thus, it can be seen that the amount of funds transferred was huge and the fact that entities are interconnected with each other and agreed to remit to other beneficiaries on the same day clearly indicates that they were aware of the scheme of manipulation and have knowingly participated in such scheme of siphoning off the money by BPML for purposes other than stated in IPO prospectus, Sebi said.

The noticees were an integral part of the scheme by which IPO funds were transferred from BPML to various entities for siphoning off, it added.

Besides, they have retained an amount of around Rs 74 lakh which can be considered as ill-gotten gains as these funds were not returned to BPML, the regulator noted.

''I conclude that noticees were fully aware of the scheme of siphoning of IPO proceeds by BPML and willingly became the conduit for the said transfer of funds by BPML from the IPO proceeds,'' Sebi's Adjudicating Officer B J Dilip said in an order passed on Wednesday.

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