SEBI Bars Trafiksol ITS, Its Promoters From Securities Market For 1 Year; Slaps ₹1.05 Cr Fine

Markets regulator Sebi on Friday barred Trafiksol ITS Technologies Ltd and its promoter-directors Jitendra Das and Poonam Das from accessing the securities market for one year and imposed penalties totalling ₹1.05 crore on them over irregularities related to the company's IPO.

Trafiksol was fined ₹30 lakh, Jitendra Das ₹50 lakh and Poonam Das ₹25 lakh, with the regulator directing them to pay the penalties within 45 days, according to Sebi's final order.

The proceedings followed complaints received by Sebi and BSE after Trafiksol's SME IPO was subscribed 345.65 times in September 2024. The issue comprised a fresh offering of 64.10 lakh shares in the price band of ₹66-70 and raised ₹44.87 crore at the upper end of the band.

Of the IPO proceeds, ₹17.70 crore was proposed to be used for purchasing software.

The company's shares were scheduled to be listed on September 17, 2024. However, concerns were raised over the proposed software vendor, Oasis Corpcare, from which Trafiksol had obtained a quotation. The complaint questioned the vendor's capability to execute the proposed contract.

Following the complaints, BSE, in consultation with Sebi, deferred the listing of the company's shares. Subsequently, in an interim order passed in October 2024, the markets regulator directed BSE to ensure that the IPO proceeds were placed in an interest-bearing escrow account until further directions.

Sebi also ordered a detailed investigation into the matter.

In its 85-page order, Sebi found multiple and serious violations in connection with the proposed public issue, including issues relating to financial disclosures, issue-related expenditure and the proposed deployment of IPO proceeds.

“The financial disclosures overstated the scale of Trafiksol's operations through unsupported year-end recognition of unbilled revenue and sale/purchase transactions with Limco and Ishira. The manner in which these entities were presented in the customer and supplier disclosures also obscured the true extent and concentration of the company's dealings with them,” Sebi said in its order.

Also, material issue-related expenditure was not appropriately disclosed, while a financial relationship giving rise to a potential conflict with the merchant banker was omitted from the DRHP, the regulator pointed out.

Sebi also flagged the Oasis quotation as a particularly serious violation, saying a substantial portion of the IPO proceeds was proposed to be deployed on the basis of a fabricated quotation.

“The conduct of the promoters, especially Jitendra Das, in relation to the Oasis quotation was particularly egregious. A substantial portion of the issue proceeds was proposed to be deployed based on a fabricated quotation obtained from an entity lacking credible technical and operational capability,” the regulator said.

Such conduct falls “severely short of the standards of diligence, integrity and responsible stewardship expected from the promoters of an issuer seeking to access public capital,” it added.

Sebi said Jitendra Das was directly involved in key aspects of the misconduct, including procuring the fabricated Oasis quotation. Poonam Das' role principally stemmed from her failure to exercise due diligence while signing the relevant documents.

As disclosed in the prospectus, Jitendra Das also serves as the chairman and managing director of the company, while Poonam Das serves as its whole-time director. They are also promoters of the company.

Accordingly, Sebi restrained all the three entities from accessing the securities market for one year and imposed penalties on them.

“Noticees Nos. 1, 2 and 3 are restrained from accessing the securities market and further prohibited 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 one year,” the regulator said.