The Securities and Exchange Board of India (Sebi) has directed BSE to not proceed with the listing of Trafiksol ITS Technologies until it completes investigation into the disclosures made by the company in its draft red herring prospectus (DRHP).
The markets regulator issued an ex-parte interim order saying ‘the attempt to award the software contract to a vendor, who prima facie appears to be a shell entity without any prior experience in developing a software platform of the nature disclosed by the company in its DRHP, was an attempt to deliberately mislead investors and divert the IPO proceeds.’
“Therefore, in order to safeguard investor interest, I am of the considered view that issues raised in this order require a detailed investigation,” Sebi’s whole-time director Ashwani Bhatia said in the order.
The regulator will complete the investigation within 30 days. In the meantime, it has directed BSE to place the IPO proceeds in an interest-bearing escrow account, and not grant the access of these funds to Trafiksol or its affiliates.
The small and medium enterprise company’s Rs 44.87 crore initial public offering (IPO) was deferred by BSE on September 17 due to certain undisclosed queries.
The issue was oversubscribed 345.65 times, with the retail portion getting subscribed 317.66 times.
The company, which provides traffic management, toll management and tunnel management solutions had said that it plans to use Rs 17.70 crore from the IPO proceeds for purchase of software from Oasis Corpcare. However, the company added that it has considered the quotation from Oasis Corpcare for the purchase of software, but had not entered into any definitive agreement.
BSE carried out a site visit of the vendor on September 19 and found the office closed with no person available on the premises, the Sebi interim order said.
In its response to the exchange on the concerns raised, the company had said the validity of the quotation obtained from Oasis Corpcare had been expired, and it is in process of seeking fresh quotations for appointment of new vendors.
The company had also said it will appoint an exchange-recommended monitoring agency to regulate the payment for procurement of the software and monitoring the use of funds raised from the IPO.
As per the regulations, appointment of an independent monitoring agency is not mandatory if the overall proceeds of the issue are less than Rs 1 billion.
Sebi said that post the deferment of the listing, it received requests from investors who were allotted the company’s shares, for cancellation of the IPO and refund of their investments.
