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Sources indicated that BSE acted following a complaint filed with the market regulator Sebi. (Photo: Shutterstock)
In an unprecedented move, BSE has postponed the listing of Trafiksol ITS Technologies, which was scheduled for Tuesday, amid investor concerns over the company’s fundamentals, balance sheet, and utilisation of issue proceeds.
The Rs 45-crore initial public offering (IPO) by the small and medium-sized enterprise (SME) firm had garnered bids worth over Rs 10,000 crore.
“In view of certain queries that have been raised, the listing for trading of the scrip is postponed till queries are resolved by the issuer,” BSE said in a circular on Tuesday.
Sources indicated that BSE acted following a complaint filed with the market regulator Sebi against the SME IPO.
Trafiksol, an IT solutions company for traffic systems and industries, launched a maiden share sale worth nearly Rs 45 crore at a price band of Rs 66 to Rs 70 per share. The issue was open for subscription between September 10 and September 12, receiving over 300 times subscription from investors.
Several participants raised questions about frequent resignations by auditors, the use of a significant portion of proceeds for purchasing software from a dubious company, a sudden exponential surge in share capital in FY23 compared to the previous two financial years through bonus issues in private placement, and an exceptional rise in profits in FY24, just before the IPO filing.
Industry players noted that in such instances, an exchange can ban the use of funds, and the funds raised during the IPO subscription period are kept in an escrow account until the issues are resolved.
Though no specific timeline is prescribed, the exchange can offer an option of refund to investors who have been allotted shares if issues with the IPO are found, said a regulatory expert.
“The decision sends a strong message to the exchanges, auditors, and the ecosystem that they need to scrutinise the balance sheets and governance of companies raising money from the public,” said a regulatory official.
The decision by the exchange comes at a time when the market regulator, the Securities and Exchange Board of India (Sebi), has cautioned investors about SME IPOs and called for higher scrutiny by the bourses and auditors.
The market regulator is also working on a consultation paper to tighten norms around SME listings following instances of fraudulent practices by promoters and gross violations of securities norms.
The market regulator may formulate norms on disclosure requirements, eligibility conditions, portions reserved for qualified institutional buyers (QIBs) and anchor investors, and audit-related scrutiny.
Exchanges have also taken steps to filter out SMEs with poor revenues and profits, implementing recent changes in eligibility and imposing a 90 per cent cap on listing gains to avoid astronomical rises.
First Published: Sep 17 2024 | 2:06 PM IST