'Unprecedented': SEBI Stays Trafiksol IPO, Asks Company To Refund Investors' Money - Order Details

Trafiksol ITS Technologies LTD IPO : In an unprecedented move, the Securities and Exchange Board of India ( SEBI ) has directed Trafiksol ITS Technologies LTD to refund the money by the investors, who have been allotted shares in the IPO.

‘Trafiksol is directed to refund the money paid by the investors, who have been allotted shares in the Initial Public Offering,” a SEBI report said while staying the IPO proceedings of the company.

Trafiksol ITS Technologies LTD: What's The Matter?

After a detailed inquiry, SEBI concluded that Trafiksol misrepresented material facts to secure investor funds. To protect investors, SEBI directed Trafiksol to refund the IPO proceeds within a week. Oversight by BSE and bankers ensures compliance, with refunded shares transferred to a company-controlled demat account for cancellation.

This move came after a last-minute complaint by the Small Investors’ Welfare Association (SIREN) which alleged the company’s reliance on a vendor with fabricated credentials.

The IPO, initially oversubscribed by 345.65 times and raising Rs 44.87 crores, was poised for listing when SEBI intervened, initiating a detailed investigation into the complaint.

Trafiksol ITS Technologies LTD: The Complaint and Findings

The complaint focused on Trafiksol's planned purchase of ₹17.7 crores worth of software, a key object of the IPO. SEBI's investigation revealed the vendor was a shell entity lacking the expertise to fulfill the contract. Misstatements in the prospectus, including falsified financials and fabricated project credentials, further tainted the IPO - SEBI noted.

“Post the closure of the issue and allotment of shares, a complaint was received by SEBI and BSE from “Small Investors’ Welfare Association - SIREN” (“Complainant/ SIREN”) in respect of the IPO. The Complainant alleged that the objects of the aforesaid issue by the Noticee included purchase of software valued at Rs.17.70 crore from a vendor which,” as stated in by SEBI. 
The vendor’s financial statements were suspiciously signed and submitted hours before the complaint surfaced.

Additionally, key individuals associated with the vendor evaded SEBI’s inquiries, further undermining its credibility.