The Securities and Exchange Board of India (SEBI) has directed Trafiksol ITS Technologies to refund the money collected from investors during its Initial Public Offering (IPO). This order follows a complaint that led SEBI to defer the company’s listing on the exchanges.
According to SEBI, the refund process must be completed within one week from the date of the order. Additionally, any interest earned on the IPO proceeds must be proportionately refunded to the investors.
Trafiksol, a Noida-based firm that provides intelligent transportation systems and automation solutions for traffic and toll management projects, launched its IPO in September 2024 on the Small and Medium Enterprises (SME) platform of the stock exchange. The issue was oversubscribed by 345.65 times and it raised Rs 44.87 crore.
Following the allotment of shares, SEBI and the Bombay Stock Exchange (BSE) received a complaint from the Small Investors’ Welfare Association (SIREN) on September 16, just a day before the shares were scheduled to be listed. The complaint alleged that one of the objectives of the IPO was to purchase software valued at Rs 17.70 crore from a vendor whose financial credentials were reportedly questionable.
In a 16-page final order, SEBI said that Trafiksol knowingly relied on fraudulent documentation submitted by a questionable third-party vendor (TPV) to justify the Rs 17.7 crore earmarked for software procurement in its prospectus.
Further, the regulator's probe revealed that the TPV has dubious financials with no prior track record in software development and had been included in the IPO documents based on fabricated profiles and forged financial statements. SEBI also concluded that the TPV was a 'shell entity'.
Trafiksol claimed that it merely obtained a quote from the TPV, and it was selected after adhering to the rigorous procedures outlined in its procurement policy.
However, Trafiksol has conspicuously failed to provide a single credible justification for engaging such an entity in the first place, the order said. It added that Trafiksol's defence that it merely forwarded documents provided by the TPV to BSE without verifying their authenticity must be rejected.