The Securities and Exchange Board on Monday banned Elitecon International, which is into FMCG and tobaccos, and five of its top officials, including its managing director Vipin Sharma, following allegations of market manipulation and misleading disclosures in a ‘pump-and-dump’ case.
In an ex-parte interim order, Sebi also impounded `51.3 crore of alleged unlawful gains and has frozen the company’s accounts. Sebi said it will conduct a detailed investigation, including appointment of a forensic auditor. The decision arose from a probe into Elitecon’s trading activities, revealing prima facie evidence of investor misinformation and inflated share prices.
Sebi said Elitecon misled investors by suppressing significant negative developments such as GST-related proceedings, while releasing only positive financial disclosures. Such actions, according to Sebi, manipulated market sentiment and exploited investor interests. Sebi has frozen the bank and demat accounts of those involved pending further investigation.
Sebi said the company created manufactured growth by hiding bad news. The company’s market capitalisation stood at nearly `7,734 crore as of March 20.
The interim order follows a detailed investigation into allegations of misrepresentation and market manipulation, which revealed a prima facie case of a fraudulent scheme designed to induce retail interest and provide an exit to promoter and connected entities, the regulator said.
Sebi further said promoter Vipin Sharma took control of the company by acquiring shares in off-market transactions from previous promoters and thereafter systematically expanded its capital base by 1,508 times through preferential allotments, warrant conversions, and a stock split.
Sebi probe also found that the company increased its share price by around 384x from Rs 1.10 to Rs 422.65, adjusted for stock split of 1:10 by engaging in coordinated and misleading disclosures, including selectively highlighting positive developments while suppressing and delaying material adverse information, and coupling such delayed information with exaggerated positive announcements, thereby facilitating the exit of the promoter and connected noticees at inflated prices.
The company also engaged in a sustained pattern of non-disclosures and misleading communications to artificially support its share price and buying interest in the scrip.
Key events, including the sealing of its registered office by GST authorities, significant tax exposure of Rs 408.65 crore, and contempt proceedings against promoter Sharma were either delayed or disclosed only after regulatory intervention.