look news india
Mumbai: 'Bhopala' has started coming to the fore in the case of IPOs of Small and Medium Enterprise (SME) companies. S.M.E. Capital market regulator Securities and Exchange Board of India (SEBI) has started opening a front against the companies. SEBI has imposed sanctions on Veranium Cloud and its managing directors on charges of transferring funds raised through initial public offering (IPO) to other entities and other fraudulent practices. This is the second such action from SEBI in the last one week.
SEBI has said that the company made public announcements to present its shining picture, while in reality there was no such economic activity. The company was listed on the National Stock Exchange-NSE Emerge platform. SEBI said that as the company's share price rose, the company's promoters got an opportunity to exit and reduce their stake at the expense of retail investors. The promoter of the company made a net profit of Rs 122.76 crore, while the company made a profit of Rs 17.61 crore.
SEBI has cautioned investors that retail investors need to exercise a certain level of caution while investing in SME companies and should not be swayed by attractive quick returns. In other words, investors need to be realistic and responsible about their return expectations.
Not only did the company have no documents to justify the transaction, but the money raised through the IPO and subsequent rights issue was not used for the purpose specified in the offer documents. SEBI said the company had conducted its transactions, which appeared only on paper and projected an image as a top IT service provider entering greenfield sectors.
IPOs of SMEs are permitted by the exchanges and do not have to undergo the strict scrutiny of SEBI. Earlier this week, SEBI had banned Ad-Shop E-Retail and members of its management from the securities market for alleged manipulation of financial statements. According to the SEBI order, the company showed false sale and purchase entries to such an extent that more than 46 per cent of sales in the last three financial years were found to be fraudulent. This order has come at a time when many SMEs are under scrutiny.